Flexible benefits schemes – an overview

Under aFlex arrangement each employee is essentially given adegree of control over how and on what their personal remuneration ‘budget’ provided by their employer is being spent.

Employees in anon-Flex environment will talk about their remuneration on asalary + pension + benefits (if applicable) basis. In the Flex arena, each element of the remuneration package is valued, including non-cash elements such as holidays, to form part of the overall budget or ‘total’ remuneration figure (sometimes referred to as “total reward”). In this manner employees begin to understand the true value of their remuneration package, which can be avaluable recruitment and retention tool in itself.

Having agreed abudget, the employer can decide on the degree of flexibility and the choices on which an employee may spend their budget. A number of employers currently offer a‘full’ flex scheme for staff, ie where employees can select from asometimes very extensive range of benefits and choose the package which most suits their personal lifestyles. However Flex is not an ‘all or nothing’ option. In fact adegree of flexibility can be offered to staff, without any additional cost, or even with reduced costs. Flex can also be introduced on agradual or selective basis.

Whether or not aformal flex scheme is implemented, there are in principle two basic approaches to the provision of non-cash benefits:

• A)benefits may be provided, but in return the employee accepts areduction in gross pay so that the employer is able to fund those benefits without increasing its costs (and the benefits may of course be structured so as to minimise tax and / or NICs), or
• B)benefits that may be provided in addition to gross