Which Benefits Drive Employee Satisfaction?

In today’s robust hiring market, employers are focused on creating attractive compensation packages for employees—including a rising trend of investing more in benefits. Gone are the days when salaries were the focus of the total compensation puzzle. Instead, workers today want benefits—workplace health and wellness programs, retirement plans, free meals, paternity and maternity leave and more. According to a recent Glassdoor survey, four in five workers today would prefer new benefits or perks rather than a pay raise.

But which benefits matter most? As employers consider changing the mix of benefits they use to attract talent, where should they invest their dollars? One way of tackling that question is to look at which benefits, among the dozens available to choose from, offer employers the biggest “bang for the buck” in terms of boosting employee satisfaction with benefits packages.

In this analysis, we study Glassdoor’s global Benefits Reviews database to understand which specific benefits increase employee satisfaction most—and which don’t. We looked at five key benefits: health insurance, vacation and paid time off, 401(k) plans, employee discounts and maternity and paternity leave.

Key Findings:

  • Core Benefits Still Matter: Simple regression analysis shows three core employer-provided benefits increase employee satisfaction the most:
    • Health insurance;
    • Vacation and paid time off; and
    • 401(k) plans.
  • More Specific Benefits Matter Less: By contrast, employee discounts and maternity and paternity leave did not have a statistically significant effect on employee satisfaction with benefits packages. This is likely due to the small fraction of employees who fully utilize these perks at any given time.

What We Did

For this analysis, we took a sample of more than 470,000 Glassdoor benefits reviews left anonymously by online employees between June 18, 2014 and September 20, 2015.[1] The sample includes 1,226 U.S. employers with at least 20 benefits reviews, across all sectors and ranging in size from 50 employees to more than 10,000 employees.

Glassdoor benefits reviews allow employees to report what benefits they receive from their employer, and rate the quality of each benefit—as well as their overall benefits package—on a scale from 1 to 5 (1 = Not Satisfied, 5 = Very Satisfied). Using basic regression analysis, we quantified the correlation between each company’s overall benefits rating on Glassdoor and the rating of five key benefits for which we had large enough sample sizes:

  • Health insurance;
  • Vacation & paid time off;
  • 401(k) retirement plans;
  • Maternity and paternity leave; and
  • Employee discounts.

We also looked at whether the presence of certain text key words in Glassdoor benefits reviews is correlated with higher overall benefits ratings, including phrases like “free food,” “discount,” “benefits,” “health insurance,” and “vacation.” This allows us to separately see the impact of employees mentioning a specific benefit in the text of their reviews, aside from their 1- to 5-star rating of it.

Using these data, we ran the following simple regression model,

Overalli = Benefitiβ1 + Keywordsiβ2 + Xiβ3 + εi

where Overalli the overall 1 to 5 star Glassdoor benefits rating for each employer; Benefiti is the rating for each of the five specific benefits offered by that company; Keywordsi is a dummy indicator equal to the number of times certain keywords appear in the company’s benefits reviews; and Xiβ3 is a set of company controls (industry and number of employees).

What We Found

Of the five benefits we examined, three had a large and statistically significant impact on overall employee satisfaction with benefits:

  • Health insurance;
  • Vacation and paid time off; and
  • 401(k) retirement plan.

Benefits That Matter Most

The factor with the single biggest impact on employee satisfaction was the quality of employer-provided health insurance plans. Increasing employee satisfaction with their health insurance by 1 star (out of 5) on Glassdoor is associated with a 0.34-star increase in average satisfaction with an employee’s overall benefits package—a statistically significant link.

GD_BenefitRatings_DriveSatisfaction_Final

The benefit with the second biggest impact on worker satisfaction was 401(k) retirement plans. Increasing employee satisfaction with 401(k) plans by 1 star (out of 5) is associated with a 0.08-star increase in average satisfaction with overall benefits packages. Although this link is statistically significant, it is much smaller than the impact of health insurance—the impact of 401(k) plans on employee satisfaction with benefits is just over one-fifth of the size of the impact of health insurance.

The last benefit with a statistically significant impact is vacation and paid time off. Increasing employee satisfaction with vacation plans by 1 star (out of 5) is associated with a 0.05-star increase in average satisfaction with overall benefits packages. That amounts to an effect that is just 15 percent of the size of the impact of health insurance on worker satisfaction.

Benefits That Matter Least

Of the five benefits we examined, two did not have a statistically detectible impact on satisfaction with benefits packages: Employee discounts, and maternity and paternity leave. Although maternity and paternity leave benefits have been growing in popularity in recent years, they may not register as a meaningful driver of employee satisfaction simply because they are not utilized by a large enough share of the workforce in most companies to affect average satisfaction in our data. By contrast, although it’s likely that employee discounts are more widely used in most workforces, our data suggest workers on average place a low value on employee discounts.

Keyword Analysis

As an additional step, we investigated whether the presence of certain keywords in the text of employee benefits reviews had any correlation with satisfaction with overall benefits packages.

Separately from how employees rate their benefits on Glassdoor’s 1 to 5 scale, one might suspect that what employees write in their reviews might also tell us which benefits matter most to them. Is there any evidence that keywords about benefits are statistical drivers of employee satisfaction, beyond the information contained in the numerical 1-to-5-star ratings of benefits?

The figure below shows our results for the keyword analysis. We analyzed five keywords: “good/great benefits,” “health,” “free food,” “vacation,” and “discount.” The figure shows for each keyword, the statistical impact of it being mentioned in reviews on a company’s 1 to 5 star overall benefits rating.
GD_BenefitRatings_Keywords_Final

Of the five keywords we examined, only one phrase had a statistically significant impact on employee satisfaction with benefits: “Great benefits” or “good benefits.” Each mention of these key phrases was associated with a 0.15-star increase in a company’s overall benefits rating, completely separate (or in addition to) the star ratings workers gave their benefits packages. Put differently, when workers talk positively about their benefits in the text of Glassdoor benefits reviews this is almost certainly a signal of high-quality benefits at an employer.

However, none of the other keywords we examined, including “health insurance,” “free food,” “vacation,” or “discount” had a noticeable impact on benefits satisfaction. It appears that most information about how workers feel about benefits is captured by Glassdoor’s 1 to 5 star rating system; keywords in the text of reviews have little explanatory power beyond star ratings.

What It Means for Employers

In recent years, there has been an explosion of diversity in the types of benefits employers are offering workers. Employers face a daunting challenge deciding which benefits to invest in. As with any investment, companies should focus on the benefits that matter most to workers—the benefits that offer the biggest “bang for the buck.”

Although exotic benefits such as tuition reimbursements and in-office gyms have grown in popularity in recent years, our analysis of the data suggest three core benefits matter most to today’s workers: health insurance; vacation and paid time off; and 401(k) retirement plans. These more traditional benefits have a large and statistically significant impact on employee satisfaction, and should not be neglected by employers as they consider less traditional benefits.

By contrast, we find little evidence that employee discounts and paternity and maternity leave have a statistical impact on average employee satisfaction with benefits. Although these benefits are highly valued by some workers, the data suggest they don’t have much overall impact on average satisfaction with benefits. Instead, the traditional benefits of health care, vacation time, and retirement plans remain the core benefits that matter most to today’s workers.

[1] The Glassdoor benefits survey launched on June 18, 2014. The sample data for this analysis was pulled from Glassdoor’s database on September 20, 2015.