Cafeteria plan basics: why do companies choose flexible pay?

While the primary reason for offering employees a cafeteria plan is that salary packages become more attractive, which is positive for recruitment and retention, there are also other advantageous considerations. In this article, we zoom in on five key benefits. 

Belgian employers are champions when it comes to offering extra-legal benefits. However, most remuneration packages are so extensive that employees are no longer aware of what they are entitled to. When they look for another employer, they usually only compare a limited number of elements, such as the cash salary and the company car. Benefits that are not specifically mentioned in the payslip, such as hospitalisation insurance, are often forgotten. The value of the total salary package is therefore often underestimated.

You can solve this problem by introducing a Total Reward Statement. This is an up-to-date, interactive overview of the employee's total reward package, with a clear description and, where possible, a valuation for each element. Moreover, the elements are divided into different categories. This way, the employee already has a good (graphic) overview of the total value of their package.

However, appreciation for the salary package increases even more when the employee is able to compose their own salary package. The classic example is the employee simulating what the impact would be on the salary package if they would choose a smaller car. If the employee gains insight into the budget and what they can possibly do with it, such as financing a bicycle, their appreciation for the value of the budget will increase. Even if they end up choosing the bigger car they are entitled to, they will appreciate the benefit more, because of this new insight into a possible downgrade. Even if an employee does not make choices in the cafeteria plan, they may appreciate the package more because they are given the opportunity to make informed choices in the future.

An important reason why many companies introduce a cafeteria plan is the need for harmonization within the company. Many companies have grown over the years through mergers and/or takeovers. The salary package is usually a typical Belgian 'koterij'. Usually, however, the wage package is not harmonized at such times. This is usually due to the costs associated with such harmonization.

Think, for instance, of an entity that offers hospitalisation insurance and merges with an entity without hospitalisation insurance but with three extra days of holiday. Just offering everyone hospitalisation insurance and three extra days of holiday would obviously result in a considerable cost. Via a cafeteria plan, you can give the employees of one entity the opportunity to opt for hospitalisation insurance, if they exchange another budget. The other employees can then - on a voluntary basis - opt for three additional days of holiday. All this without any additional cost for the employer.

The difficult discussions concerning harmonization can also be conducted transparently this way. The employees will, in fact, gain clear insight into the costs that certain extra benefits entail for their employer. Moreover, this will again increase the appreciation of the salary package.

Many companies have specific pain points in the salary package. These pain points sometimes make it difficult to retain or attract certain employees. A Belgian, for example, is not only ‘born with a brick in their stomach’, but also with a company car. Many SMEs therefore have difficulty attracting certain profiles if they do not offer that company car.

However, it is not possible for many companies to introduce this benefit into the standard salary package on a day-to-day basis. This is not fair to other employees who are not entitled to the company car. If a company car is part of the cafeteria plan, you can give the new employee the opportunity to exchange wages for a company car. At the same time, you also offer the other employees the possibility of choosing a company car - at no extra cost. That way, you keep all your employees happy and make your company more competitive.

There are many other examples that fit into this scenario. Think of the standard smartphone that is included in the salary package that not everyone may be happy with, or the employee who has either too little or too much holiday time.

Alternative mobility is hot, but it is not always possible to introduce it without additional costs. For example, not all employees have a car or mobility budget. Even if employees do have a car, most are not always willing to downgrade or hand it in.

The solution is then to introduce alternative mobility via the cafeteria plan. This can involve traditional bicycle leasing, but also a budget for a mobility app that employees can use for parking at train stations, using public transport, shared bicycles, or shared cars.

Of course, you can also go further. For example, you can offer the possibility of exchanging the unlimited fuel card. For companies located in city centres, it can be interesting to include the budget for parking in the neighbourhood in the cafeteria plan. This way, employees can decide for themselves whether they want to exchange this budget for another benefit. For example, they can also opt for an additional but cheaper parking space.

A cafeteria plan tells a great story. You show that, as an employer, you want to play a pioneering role. Although more and more companies are introducing cafeteria plans, flexible compensation plans remain very innovative. As an employer, you can use a cafeteria plan to emphasize a few specific topics.

For example, you can draw attention to green mobility through bicycle leasing or the introduction of electric cars. CSR can also be given a place in your cafeteria plan by introducing the donations module and selecting a few specific charities.

You can emphasize this innovation by using an attractive and user-friendly tool. It is important that the tool is fully adapted to your own branding and communication.