Paying your employees flexibly: thought about a “cafeteria” plan yet?
March 2023 – A cafeteria plan allows employees to put together their remuneration package à la carte. Not only financial compensation but also mobility allowances, training courses, extra holidays, and a smartphone or laptop are eligible. The allowances are also budget-neutral for employers.
You already understood that a cafeteria plan has nothing to do with coffee or beer. With a cafeteria plan, employees are given a budget to choose several fringe benefits from a list compiled in advance by the employer.
There are four categories of benefits involved:
● financial: pension savings, hospitalisation insurance, reimbursement of internet costs, etc.
● work-life balance: extra holidays, training, medical checks, ...
Mobility: bicycle, car or mobility budget
● electronics: smartphone, tablet or laptop.
Great flexibility at no extra cost
Important to know: employees are not obliged to choose from the cafeteria plan. They can also have the amount paid out as wages, although this is less interesting from a tax point of view.
In practice, most employees, therefore, prefer a flexible pay package. It boosts their motivation and also generally strengthens their relationship with their employer. And because a cafeteria plan does not entail any additional costs for the manager, the concept quickly becomes established in most companies.
Tax and administrative complexity of a cafeteria plan
The only downside to a flexible remuneration package is the tax and administrative complexity. With all those fringe benefits, the payroll calculation becomes a lot more complex.
Some points of interest:
● the reduction in gross pay has an impact on holiday pay, the end-of-year bonus, indexations, employer and personal group insurance contributions, and so on
● a pay reduction is only possible by mutual agreement between employer and employee
● the applicable legal and sectoral provisions on fringe benefits must be respected at all times.
In short, entrepreneurs can make good use of their accountant's expertise in this matter.
