BENEFIT SYSTEM EFFECTS ON EMPLOYEES’ BENEFIT KNOWLEDGE, USE, AND ORGANIZATIONAL COMMITMENT Robert R. Sinclair Portland State University Michael C. Leo Oregon Health and Sciences University Chris Wright CorporateSurvey.com ABSTRACT: We identified four attributes of benefit systems thought to influence employee attitudes and behavior: employee participation, system quality, com- munication quality, and benefit importance. Survey data from 974 employees of a Fortune 500 energy industry firm supported a partially mediated model in which these benefit system features exerted both indirect and direct effects on benefit knowledge and use, as well as on affective and continuance commitment. How- ever, the findings differed across benefit system features and across types of benefits. Specifically, improving organizational communications about benefits appears more useful than increasing employee participation or improving benefit system service quality. KEY WORDS: organizational commitment; employee benefits; social exchange; human resources management. Effective compensation practices provide organizations with a com- petitive advantage by increasing their ability to attract and retain employees. However, compensation systems continue to increase in scope and administrative complexity and employers have become increasingly interested in benefit cost containment (cf. Bergmann, Bergmann, & Grahn, 1994). For example, in the United States, benefits have grown from approximately 3% of payroll in 1929 to an average of 27%, with some companies devoting 40% or more of their payroll to benefits (U.S. Department of Labor, 2001). Many social factors influence these costs, Address correspondence to Robert R. Sinclair, Department of Psychology, Portland State University, PO Box 751, Portland OR, 97207-0751, USA. E-mail: Sinclair@pdx.edu Journal of Business and Psychology, Vol. 20, No. 1, Fall 2005 (Ó2005) DOI: 10.1007/s10869-005-6981-1 3 0889-3268/05/0900-0003/0 Ó 2005 Springer Science+Business Media, Inc.