In his book Industry and Society, Arthur James Todd describes employee welfare as a means of improving the social and intellectual lives of employees both on and off the job, in addition to their wages. Businesses invest in employee welfare plans, such as health insurance, retirement plans and employee assistance programs not only as way to improve life for their employees, but also to improve employee morale, productivity and retention.
The objective of employee welfare is to improve life for a worker both in and outside of work. These programs increase employee satisfaction and ensure that workers are healthy and not distracted by personal issues that may affect their productivity. Additionally, employee welfare programs promote goodwill in the community and enhance the public image of the organization.
Employee welfare plans operate on some basic principles. The programs and services offered meet the real needs of the employees; for example, health insurance plans help protect employees’ health while controlling their out of pocket costs. A cafeteria approach to these programs is an important factor in meeting employee needs based on age, gender, marital status, number of children, type of job and income level. Cafeteria plans allow workers to select welfare benefits that suit their needs. Nonetheless, these programs are not benevolent gestures on the part of the organization -- they are investments in employee productivity, retention and development. As such, they require proper funding and management using sound business practices, and they must be in compliance with labor laws and negotiated labor agreements, as appropriate. Like all business operations, regularly evaluating these programs helps determine the long-term efficacy and any needed changes.
Employee welfare programs supplement a worker's pay. Often referred to as “fringe benefits,” these programs offer facilities and amenities to improve health, social and economic situations. Workplace welfare ensures that the work environment is safe and offers basic amenities like break rooms, restrooms, appropriate heat and lighting, and the absence of safety hazards. Welfare benefits outside the workplace may include services like child care, prepaid legal services, discounted travel arrangements, movie tickets, fitness center memberships and merchandise at local stores. In addition, some organizations also offer tuition reimbursement for work-related educations, scholarship programs for employees and their dependents, along with traditional services, such as health and retirement programs.
The Employee Retirement Income Security Act, or ERISA, regulates employee welfare programs. This law sets the minimum standards for establishing and operating programs, including health insurance, vacation and sick leave, education and training programs, day care services, scholarship funds, and other employee welfare services. Under ERISA, organizations must manage these programs for the exclusive benefit of their employees and their dependents, meaning the business cannot generate income from welfare programs. Additionally, organizations must avoid all conflicts of interest related to the programs; properly fund and manage the plans; and give employees and the government regular reports on the programs’ operation and financial condition.