FLEXIBLE BENEFITS VS VOLUNTARY BENEFITS: AN IN-DEPTH GUIDE

Offering the right benefits for the workforce can be a real challenge for HR teams and business owners. In the dynamic landscape of the modern workplace, attracting and retaining top talent has become a strategic imperative, so providing the most customisable workplace rewards for every individual requires a lot of thought and a?robust rewards strategy.

It’s important to know the different types of benefits you could be presenting your staff with. For example, what are voluntary benefits? What is the difference between these and flexible benefits, and which would suit your workforce better?

In this guide we explore these different benefit types, highlighting what they mean, and how they could work for your team.

Flexible Workplace Benefits

Definition

Flexible workplace benefits?refer to a customisable package of perks that employees can choose from, meaning they can tailor their benefits to meet their individual needs. These benefits can include health insurance plans, retirement contributions, wellness programmes, and more. The flexibility means employees can allocate a certain amount of their total compensation towards the benefits that matter or appeal to them the most.

Advantages

• Employee Engagement:?Offering flexibility empowers employees to choose benefits that align with their unique needs and lifestyle. This leads to higher satisfaction levels and increased morale within the workforce.
• Attracting Diverse Talent:?Employees have different priorities?based on their life stages?and personal circumstances. By providing a range of options, businesses can attract a diverse workforce and cater to the varied needs of employees at different career and life milestones.
• Cost-Efficiency:?Flexible benefits can be cost-effective for businesses. Instead of providing a standard benefits package for all employees, companies can allocate a benefits budget which their employees then decide how to use. This approach often results in more efficient spending.
• Staff Retention:?Personalised benefits contribute to higher employee retention rates. When employees feel valued and supported through benefits that address their specific needs, they are more likely to stay engaged and remain loyal to the company.

Download our guide?for more information on how to drive staff retention and wellbeing.?

Disadvantages

• Administration Complexity: Managing a flexible benefits program can be more complex than a traditional one-size-fits-all approach. Administratively, it may require sophisticated systems to track and manage individual benefit elections. Using a comprehensive HR solution such as Strait Logics’ suite of tools could help you to consolidate and simplify all your rewards-related admin in one user-friendly channel.
• Initial Resistance:?Employees accustomed to traditional benefit structures may initially resist the change. Education and communication efforts are essential to help them understand the advantages of the new approach.
• Communication Challenges:?Proper communication is crucial for the success of flexible benefits programs. Employees need to understand their options and make informed decisions. Failure to communicate effectively may result in underutilisation of benefits or dissatisfaction among employees.?It’s important to ensure you have?comprehensive communications?strategies in place so that employees know what rewards are accessible to them. Understanding how to utilise your?Total Rewards Statements?could be a great place to start.

Voluntary Workplace Benefits

Definition

Voluntary benefits are additional perks and coverage that employees can choose to purchase at their discretion, over and above the company’s core rewards offering. These benefits typically include options like supplemental insurance, dental coverage, disability insurance, and other non-mandatory offerings.

Advantages

• Customisation:?Voluntary benefits?allow companies to add flexibility without completely overhauling their existing benefits structure. Employees can choose to participate in these additional programmes based on their individual needs.
• Cost-Effective:?Since voluntary benefits are often employee-funded, they can be a cost-effective way for businesses to enhance their overall benefits package without shouldering the entire financial burden.
• Broad Appeal:?Voluntary benefits can be designed to appeal to a wide range of employees. Offering a variety of options enables businesses to?cater to the diverse needs and preferences?of their workforce.
• Attracting new talent:?Providing a robust suite of voluntary benefits can give businesses a competitive edge in the talent market. It signals that the company is invested in the wellbeing and financial security of its employees.

Disadvantages

• Accessibility:?Voluntary benefits may not be accessible to all employees, especially those facing financial constraints. This could potentially create disparities within the workforce.
• Underutilisation:?Employees may not fully understand the value of certain voluntary benefits or may underestimate their need for them, resulting in underutilisation.
• Administrative Burden:?As with flexible benefits, managing and administering voluntary benefits still requires attention to detail and effective communication to ensure employees are aware of their options.

Strait Logics’?Rewards Portal,?offers a one-stop benefits management and communication solution with personalised messaging, the ability to open and close benefit windows at any time, and easy beneficiary management being just a few of the advantages of using our Rewards Portal. That means your staff get a personalised picture of their benefits, which they can control and manage, while you reduce the administrative load for your HR team.

What Flexible and Voluntary Benefits could mean for your Tax Efficiencies

The tax implications of flexible and voluntary benefits vary based on the structure of the benefits and the jurisdiction. In many cases, contributions made by employees to voluntary benefits are deducted from their pre-tax income. This means employees may enjoy tax savings on the amount they allocate to these benefits.

For businesses, providing certain types of benefits can also have tax advantages. Contributions made by the employer towards benefits like health insurance and retirement plans are often tax-deductible. However, the specific tax treatment can vary, and it is crucial for businesses to consult with tax professionals to understand the implications of their benefit offerings.

Finding the Right Benefits Balance

In the pursuit of attracting and retaining top talent, HR teams must recognise the importance of offering personalised and flexible workplace benefits. Both flexible and voluntary benefits have their advantages and disadvantages, and the optimal approach often involves finding the right balance between the two.

While flexible benefits empower employees to tailor their packages to their specific needs, voluntary benefits allow for additional customisation, giving employees the power to enhance their own compensation package according to their preferences and life stages. Both approaches contribute to employee satisfaction, retention, and overall wellbeing. What’s more, implementing a well-thought-out benefits strategy can result in cost savings and tax advantages for both your employees and your business.

Ultimately, the one-size-fits-all approach to workplace perks simply isn’t working anymore. The future of employee benefits lies in offering choices and recognising the diverse needs of a modern workforce. By embracing flexibility and personalisation, businesses can position themselves as employers of choice, fostering a positive workplace culture and ensuring the long-term success of their organisations.

For more information about how you could find the right balance with your benefits,?get in touch to request a demo.