An introduction to flex schemes

A flexible benefits (‘flex’) scheme allows an employee some degree of choice over the benefits included in their remuneration package. Such a scheme may incorporate salary sacrifice arrangements, under which the employee agrees to give up an entitlement to cash remuneration in return for benefits. However, the terms are not synonymous ― a flexible benefits scheme need not involve salary sacrifice, and salary sacrifice may relate to one or several benefits.

Employers may offer voluntary benefits which employees choose and pay for themselves, commonly through deductions from net pay. These may be offered alongside employer-funded benefits and salary sacrifice options within the same scheme. For benefits purchased from net pay, the attraction may be access to employer-negotiated discounts, convenience and a wider choice of benefits, rather than tax or national insurance savings. The employee’s taxable cash remuneration is not reduced for such benefits.

This guidance note sets out the basics of how a flex scheme might work, alongside the usual steps involved when implementing a successful scheme. A number