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A benefit program where employees can select from a range of benefits offered by their employer in order to meet their own specific needs. The employer determines their level of financing and the employee chooses according to his needs and budget.

According to Hewitt Associates’ Flexi-ability: Employer Attitude Towards Flexible Benefits (2002), the main reasons of the adoption of flexible benefits in an organisation are:

91% — to cater diverse work force

67% — contain benefit cost increases

38% — attraction / retention

35% — employee satisfaction and employee awareness

Types of Flexible Benefits

Core Plus Options – The employer provides a minimum level of core benefits to each employee. The employee is allowed to supplement the benefits beyond the core benefits provided, usually through a salary reduction program.

Modular — The employer combines certain benefits into packages. The employees are allowed to choose the pre-designed benefits package. The employees are not allowed to pick and choose benefits from the various packages.

Full-flex — The employer places a price on all benefits that make available to the employees. The employees are then given certain amount of credit to purchase the benefits, or opt out of the benefits and take all or some of the credits in cash.

Flexible Spending Account (FSA) — Allow the employees to contribute pretax dollars to an account that may later be used to reimburse for benefits that purchased by the employees. The pretax dollars that the employees use to fund the account usually come from salary reduction program. The employee budget annually, and if they don’t use the money, they lose it.

Premium-only — Allow the employer to pay for a certain amount of the employees’ health coverage while the employees pay the remaining difference with the pretax dollars through a salary reduction program. The company is making the employees pay at least part of the premium.

Opt-up / Opt-down — The employer provides the employees with both high- and low-level benefits. If the employees decrease the benefits to a lower-level, they shall receive credits that are payable as taxable income. If the employees increase the benefits to a higher-level, they shall pay for the extra cost, usually through a salary reduction program.

Add-on — This plan provides the employees with basic low-level benefits and allows the employees to supplement or add on to the benefits. Usually used when the benefits that the employer provides are below the norms.

The design of Flexible Benefits is depending on the following factors:

How Does the Company Positions its Benefits

Key Component – to attract and retain employees

Neutral Element — Employee neither join or leave because of benefits and perks

Minimise — Few or no benefits are provided, rather money is spent on base and incentive pay.

Budget / Limitation

Generosity vs Manage Cost Wisely

Routine Needs vs Catastrophic Needs
 
Rules & Regulations vs Flexible

Market Practice vs Market Leader

Employee vs Family

Same for All vs Based on Category

Administration Options

Paper Based vs Computer Based