Flexible Benefits or "flex" is a generic term for an employee reward system that allows, at least in part, some employee choice over the elements of their pay and benefits package. The term is used loosely and can mean completely different types of scheme to different companies and individuals. This fact sheet defines some terminology that we have developed within Redbourne to help our customers understand and articulate their requirements of a flex scheme.
We characterise flex into three broad types of scheme:
We consider the first two as "real" flex and the third a type of incentive scheme that is mistakenly, and sometimes deliberately misleadingly, called a flex scheme. The first two involve considerably more commitment from the employer: contracts with benefit providers, scheme administration, employee communication. A strong employer commitment results in significant benefits to the organisation. In the third type of scheme there is usually no requirement to manage the benefit enrolment and payment but, although more simple to operate, they fail to offer the tax advantages of 1. or 2. and the employer risks "cheapening" their internal brand particularly if access is given to the employees for the purpose of worksite selling.
A key consideration in any flex scheme and a characteristic of most is the ability of an employee to sacrifice, or exchange, salary to spend on benefits. Employees that opt to exchange salary for benefits through the plan will obtain tax and National Insurance relief for exempt benefits that include pensions, childcare vouchers, computers, life cover, mobile phones and additional holiday days. Other exempt and partially exempt benefits are also included in flex plans.
See our Salary Sacrifice fact sheet for more information.
An example of the main steps in setting up and operating a scheme is given below:
Flex is simply a term used to describe modern employee benefit arrangements that give the employee flexibility in the choice of their salary and benefit package. Often a key part of a flex scheme is the ability of the employee to exchange salary for further benefits realising tax and NI savings in the process.
Please contact us for more information.
An introduction to flexible benefits.
Practical tips.
The concepts, benefits and issues.
Possible tax advantages of benefits.
Tax credits and their effect on flex schemes.
Eliminate paper forms with a modern benefits scheme.
Incorporating medical insurance in a flex scheme.
How to be effective.
How to ensure things do not go wrong.
Issues for contracts of employment.
Voluntary employee benefits; deals and discounts.
Developing an environmentally sensitive employee benefit package.
Making a real difference.