What is the difference between flexible and voluntary benefits? 

Benefits are commonly a standard element of many employment packages. The quality and type of benefit offered by an organisation can determine how attractive that organisation is perceived to be by potential candidates and should also contribute towards retaining existing staff.

Benefits cover a range of options, and employers will generally offer a core set. These commonly include things such as pension contributions and basic healthcare. These traditional benefits are usually offered among all employees with the only exception of some exclusive benefits provided to senior management.

However, the inflexibility of the core benefits package can mean that some of its components may not be highly valued by some staff (or potential hires) as they may be largely irrelevant to their individual needs. 

Employers are increasingly taking advantage of the option to customise their offerings through either voluntary or flexible options. This affords their employees greater control, allowing them to tailor their benefits to their own personal and family circumstances. From an employer’s perspective, this retains control of costs while providing staff with more valuable options.

Further perks offered on top of a typical employee benefits package will normally come under the heading of flexible or voluntary. Here we examine the difference between both types.

Flexible benefits to enhance core benefits

Flexible benefits are typically offered in addition to the core benefits package. They may constitute options that are designed to complement or enhance the core benefits already provided to the employee and those that are not related to core benefits. Flexible benefits may also provide the option to trade some core benefits for others within the flexible benefits range.

Perhaps one of the most popular complementary options would be the ability to enhance a private healthcare benefit, enabling the employee to add cover for their spouse or children. Employees may also be able to opt for additional pension contributions from their employer.

Other popular flexible benefit options commonly offered by employers include such things as critical illness cover, income protection, dental cover and gym memberships.

If an employer’s scheme offers the option to trade core benefits, an employee may be able to choose to take fewer paid holiday days, for example, to increase the value of the pot available to them for flexible benefit options.

Flexible benefits: advantages for both employer and employee

From an employer’s perspective, offering a flexible benefits scheme means that they can allow their team members to tailor benefits to suit their circumstances while retaining control of costs. An employee will have a set value that they can spend against flexible benefit options.

For an employee, the ability to customise their benefits to their current circumstances can be highly attractive. With flexible benefits, there may be some salary sacrifice required from the employee, but they can choose benefits which best suit themselves and their families. 

Also, employees have the advantage that the benefits have been negotiated and researched by their employer or their employer’s benefits provider, meaning that the quality and value for money should be competitive.

Voluntary benefits

Voluntary benefits again tend to be offered alongside the employer’s core benefits package. As with flexible benefits, they can either be used to enhance the core benefits offered by the employer or to provide the employee with additional options not commonly offered under core benefit schemes.

Voluntary benefits can include participation in a cycle to work scheme, nursery vouchers, dental cover and even discounts at supermarkets. While the employee covers voluntary benefits through salary sacrifice, they don’t have to undertake research into the options available on the open market or invest the time needed to administer these options for themselves. 

As the benefits have been negotiated at a group level by the employer or the benefits provider, volume discounts should ensure that the cost will be more competitive than that available to individuals on the open market.

Voluntary benefits: advantages for both employer and employee

For the employer, a voluntary scheme enables them to offer their team a range of options with individual flexibility while keeping costs to a minimum. The cost to the employer will be the initial set-up of the scheme, administrative charges levied by their chosen benefits provider and some internal resource required to handle the administrative and reporting requirements of the scheme.

For the employee, a voluntary scheme once again allows them to customise core benefits. For example, if their core benefits package includes dental care for just themselves, they could choose to extend the cover to their spouse and children at an additional cost. The cover for themselves would still be provided as a taxable benefit by their employer, and only the extra cover would be paid for by the employee at a discounted volume rate.

Offering flexibility while retaining control of costs

Employers can choose to offer a flexible or voluntary benefits scheme in addition to their core benefits package. In some cases, employers will offer a combination of both.

A flexible benefits option will incur a higher cost for the employer, although it still allows them to manage costs within a set budget. A voluntary benefit option will enable the employer to provide competitive benefit opportunities for their staff at a much-reduced cost, with the team member funding the cost. For an employer, offering a voluntary benefits scheme can be an attractive option, particularly if the organisation is operating under tight cost constraints.

Whether a company provides a voluntary or flexible benefits package, the employee can tailor their benefits to suit their personal circumstances. The motivational and productivity benefits of a flexible benefits package are always well accepted.

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