Flexible and voluntary benefits
Resource summary
This factsheet was last updated in January 2012.
What are flexible and voluntary benefits?
While both flexible and voluntary benefits schemes aim to foster employee choice by providing flexibility over individual benefits packages, it is important to clearly distinguish between the two types of arrangements.
Flexible benefits schemes (also known as ‘cafeteria benefits’ or ‘flex plans’) are formalised systems that allow employees to vary their pay and benefits package in order to satisfy their personal requirements. Under true flexible benefits schemes, the dividing line between pay and benefits becomes less rigid than in standard reward packages. In most schemes, employees are able either to retain their existing salary while varying the mix or levels of various benefits they receive or to adjust their salary up or down by taking fewer or more benefits respectively.
Voluntary benefits (also known as affinity benefits) are those products and services that are available through an employer for purchase by employees, usually at a discount, out of their own taxable income or sometimes via salary sacrifice arrangements. These schemes differ from flexible benefits schemes as the employee, rather than the employer, pays for the cost of the benefits. Under such schemes – although the employer does not pay for the benefits provided – some costs may be incurred, for example in respect of the time spent researching suppliers of services or for administration fees.
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