2024

What are Flexible Benefits?

Flexible benefits enable workers to access a wider range of benefits from the employer’s package. The employer will often decide the benefits levels and types they want to offer their workers.

According to the U.S. Bureau of Labor Statistics, in 2021, 31% of state and local government employees had access to flexible benefits. This figure was 35% for education employees, 36% for hospital employees, and only 11% for private industry workers.

However, the term flexible implies that the workers can choose from various benefits. This article will discuss what you should know about flexible benefits plans and how they impact your workplace.

How do Flexible Benefits Work?

People have different desires, needs, and preferences. Therefore, a particular benefit can be excellent for one worker but cannot work for others. This statement explains why allowing them to choose from a list is crucial.

Nevertheless, flexible plans are rare and often not adjustable. Employers find it somewhat challenging to design gifts that suit all workers. Besides, most employee benefits programs feature essential benefits, such as health insurance, that most workers cannot ignore.

Yet, increasing the number of benefits can allow workers to enjoy flexibility and lower retention. It would be best to mention that employees will feel valued if they access benefits plans tailored to their lifestyle.

employee benefits

Most times, the flexible compensation option reduces the employer’s contribution since the workers ought to contribute to the cost of attaining compensation plans that suit their needs.

Thus, some employers offer this option since it lowers their expenses by deducting their salary to provide the best gifts, which can be an incentive. Besides, the two parties share the costs.

In such a case, the employee must choose what works best for them, but the employer decides on a fixed compensation plan. Thus, workers can decrease or increase their wages in line with a decrease or increase in their compensation plan.

If you want to master employee management so that both sides get what they want, check out our certified HR courses.

Human Resources Certifications

What Does a Flexible Benefit Include?

A flexible benefits plan can include workplace nurseries, cycle-to-work programs, bicycle loans, travel concessions, gym memberships, retirement plans, and health plans. These plans vary among companies.

In simple terms, the human resources department must research what offers their workers value most. This step is vital since preferences may vary between demographics and groups. Checking competitors’ services can be a strategic approach to selecting industry-standard options.

Process to Implement Flexible benefits

It would be best to mention that most companies feature company-paid offers. In other words, the company offers core benefits at minimum levels, and the workers cannot deselect to get money instead.

The key takeaway is that creating a flexible benefits plan makes your staff feel more valued and listened to.

Offering your workers the benefits they prefer motivates them since it makes them feel that you value their services. Also, when employees feel that their personal lives improve due to their work efforts, they become more optimistic about the workplace.

For instance, if workers can access their GP information, they think more about their work results. Thinking more about their work enables them to formulate more problem-solving ideas, making them work harder to perform even better.

Flexible Benefit Types

Several types of flexible benefits apply depending on the company’s setup. The most popular benefit plan is the cafeteria plan. This benefits plan includes various benefits covering eligible expenses, provided they match the IRS criteria in Section 125.

Pros and Cons of Flexible Benefits

This option may include various benefits options, such as a 401 (k), HSA (Health Savings Account), dental, vision, critical care, medical opt-out, premium conversions, life insurance, and cash value.

It is crucial to note that flexible benefits often come with ancillary features. Thus, employers’ and workers’ obligations and rights may differ from region to region and state to state.

Conclusion

The bottom line is that all benefits, including flexible benefits, pertain to workers’ future planning, home life, and workplace requirements. HR University is a reliable platform offering tips to help workers and employers choose the best benefits options. The platform provides tips about crucial benefits and aspects to consider.

Besides, HR university provides online courses to help you skyrocket your human resources knowledge. It would be best to check out the platform today before you decide about workplace benefits.

They can be your best financial advisors regarding flexible benefits, reimbursement accounts, health insurance, child care, and additional benefits. Check out for more information.

FAQs

Here are the most frequently asked questions about flexible benefits.

What are flexible benefits, and how do they work?

Flexible benefits allow employees to customize their compensation packages to better suit their needs. These plans often include more options, such as allocating funds toward healthcare expenses, retirement contributions, or other personal priorities. This approach enhances the value of a total compensation package.

How do Health Reimbursement Arrangements (HRAs) fit into flexible benefits?

Health Reimbursement Arrangements (HRAs) are a key component of many flexible benefit plans. They enable employers to offer tax-free reimbursements for qualified healthcare expenses, such as medical visits or prescriptions. HRAs are tailored to address personal health needs without increasing taxable income.

What are the tax benefits of flexible benefits?

Flexible benefits offer significant tax advantages for both employers and employees. Employees can reduce their taxable income by allowing contributions through pre-tax dollars while still covering essential costs like healthcare expenses. Employers benefit as well by potentially lowering payroll tax obligations.

Can flexible benefits help with managing healthcare expenses?

Yes, flexible benefits are particularly helpful in managing healthcare expenses. Employees can use tax-free funds for medical costs or leverage HRAs to ensure their healthcare spending is efficient and cost-effective. Employers well-versed in flexible benefits plans can help employees take advantage of these advantages.

How do flexible benefits contribute to an enhanced compensation package?

Flexible benefits enhance a compensation package by offering customization and tax advantages. Employees have the freedom to choose benefits that align with their priorities, such as health, retirement, or other life expenses, making the overall package more appealing. Additionally, these plans allow employees to pay for services and benefits in ways that fit their unique needs.


If you are new to Human Resources and are looking to use flexible benefits, we recommend taking our HR Certification Courses. You will learn how to build your skillset in human resources, build your human resources network, and create a successful job search strategy that helps you create professional teams who will be happy to work for you.

author-image
Josh Fechter
Josh Fechter is the founder of HR.University. He's a certified HR professional and has managed global teams across 5 different continents including their benefits and payroll. You can connect with him on LinkedIn here.