Flexible benefits
Flexible benefits (sometimes called ‘cafeteria systems’) allow employees to decide,
within certain limits, on the make-up of their benefits package. Schemes can provide for a
choice within benefits or a choice between benefits. Employees are allocated an individual
allowance to spend on benefits. This allowance can be used to switch between benefits, to
choose new ones or to alter the rate of cover within existing benefi ts. Some core benefi ts such
as sick pay may lie outside the scheme and cannot be ‘fl exed’. Employees can shift the balance
of their total reward package between pay and benefits, either adding to their benefits allowance
by sacrificing salary or taking any unspent benefit allowance as cash.
Segmentation
Segmentation involves the identification of the special individuals or groups of employees
who create the most value and providing them with an individualized (and better) reward
package. It allows employers to tailor their rewardprogrammes to the needs and wants of their
employees of choice. However, segmentation can damage morale. It creates an elite group and
may be perceived as a form of favouritism.
Taxation
It should be remembered that most benefits are taxable as ‘benefits