What Is a Flexible Benefit Plan?

A flexible benefit plan in India allows employees to structure and modify CTC components based on the offered benefits like medical expenses and conveyance. Catering to employees who have their own financial constraints with something like a flexible benefit plan can highlight your concern for your employee’s financial wellbeing.

For many years now, organizations, whether big or small, have tinkered with the idea of flexible benefit plans.

A flexible benefit plan (FBP) allows your employees to have more control over their salary and benefits package. They can restructure components accordingly. Let’s see how this is achieved.

Understanding Flexible Benefits Plan

A flexible benefit plan in India allows employees to structure and modify CTC components based on the offered benefits like medical expenses and conveyance.

Usually, the CTC structure of the employee has multiple components like dearness allowance, HRA, medical expense, basic, medical expenses, etc.

Amongst these components, some are taxable like DA and basic pay, and others are non-taxable like medical expenses. The non-taxable components of the salary are received in the form of reimbursements.

Let’s understand this with an example:

James works in an organization. The HR department is offering HRA, DA, conveyance, and basic pay. However, James owns a house and doesn’t need to rent a place. This means his HRA is fully taxable and not useful to him. He would rather choose leave travel allowance (LTA).

This freedom to choose is the power of a flexible benefit plan. It helps employees fulfil their tax requirements.

Flexible Benefits Plan Components in India

There are two types of flexible benefits plan components in India.

  • The monthly component which is paid by the HR department on a monthly basis. These components include HRA, vehicle lease, etc.
  • The annual component is paid to the employee on a yearly basis, only when the employee claims it. For instance, fuel, telephone, book reimbursements etc.

Flexible Benefits Plan Advantages

1. Employee Satisfaction

Above all, a flexible benefit plan helps you fulfil employee requirements.

Not every employee is ready to settle for the salary structure an employer has to offer. Some want to be more responsible for the benefits they entitled to.

When you offer your employees this flexibility, you’re essentially giving them the upper hand to satisfy themselves with the perks they desire.

Employees feel empowered as you’re taking their inputs and allowing them to make decisions. It also fosters a better work environment, and you’ll be seen as being more humane.

2. Tax Saving

As elaborated in the example of James, a flexible benefits plan helps save taxes. Employees not requiring rented accommodation can benefit a lot if a considerable amount of the salary doesn’t go towards HRA. This restructuring helps employees to reduce their tax liabilities to a great extent.

3. Company Trasnparency

By offering a flexible benefit plan, employees can get a complete breakdown of the perks on offer.

Additionally, they understand what benefits each perk carries.

all this fosters positive attitude in your company and renders your company as being transparent.

4. Effective Recruitment and Retention

A flexible benefit plan helps you attract and retain talent as appealing and competitive benefits are on offer.

You can also do so much more to attract the cream of the lot. For instance, your flexible benefit plan could also offer student loan repayment assistance.

While there are some drawbacks to this plan such as setting-up costs and disclosing information on benefits, the end result is quite impressive.

Your employees can take home a bigger portion of their salary, which is obviously extremely beneficial in terms of financial flexibility.

Every employee is unique, and so are their needs. Catering to them with something like a flexible benefit plan only improves your reputation.

1 Star2 Stars3 Stars4 Stars5 Stars (2 votes, average: 5.00 out of 5)

One of the prime contributors for this blog, Expertise in Staffing and Recruitment, Content Strategist by Profession. A Music Lover & Traveller by Choice.

Get Connected with HR Trends


      1. comment-author
        Shalini L

        Hi Haressh,

        We’re glad you liked it! Be sure to subscribe to our bi-monthly newsletter that captures the best and the latest stories from the world of HR.

    Post a Comment

    Your email address will not be published. Required fields are marked *

    Subscribe For Newsletter

    Subscribe to get the latest news and happenings around recruitment space

    Please hold while we process the request.