Employees must prove they have a legitimate expense in order to be reimbursed from these accounts. Invoices from health care professionals or day care facilities would serve this purpose. However, employees must also prove that the claim has not been reimbursed by other coverage, such as a spouse's insurance.
Funds placed in reimbursement accounts generally must be used during the calendar year in which they were contributed; otherwise, the employee forfeits the funds. For this reason, participating in a flexible spending account requires careful planning on the part of both employees and employers. A small business can manage its own flexible benefit plan with the proper software. Since these plans are under the watchful eye of the IRS, it is important that record keeping and benefit payments be accurate and timely.
Many companies hire an outside firm to manage their plan, which reduces internal headaches but at a higher cost to the company. Some insurance companies also provide administrative services for flexible plans. Employer contributions to cafeteria plans are tax deductible for the employer and are not subject to income tax for the employee. Many states follow the same guidelines regarding state taxes but companies should check with their accountant or the state's tax department to be sure.
Obviously, flexible benefit plans are not without their drawbacks. But for small businesses looking to attract and retain key personnel with competitive benefit packages while keeping their own costs low, they can be an attractive alternative to standard benefit plans. Further information about setting up and administering flexible benefit plans is available from the Employee Benefits Institute of America at www.
Henricks, Mark. May Gould, Jay. People often feel like they can't have a boss who recognises their needs and different life-stages while also offering benefits. Prove them wrong and attract top talent that needs flexible benefits for all the right reasons. Flexible benefit packages allow employees to choose the benefits that fit their needs and wishes. Offering rewards and benefits is part of a good company culture, but making them flexible and tailored to individuals, gives this culture an extra boost.
It shows that your workplace is one that recognises individuals and listens to specific needs, while acknowledging that everybody still deserves rewards — regardless of their position. You should never take care of your employees only as part of a publicity stunt, but it does look great to the outside world too.
We follow our head, but also our heart. And people tend to favour brands who are known for treating their people well. But while you grow and change, you want to be able to keep delivering the benefits you promised and have them be proportionate to your success.
When you work with your employees to create a flexible benefits program, they will feel listened to and valued.
Offering the benefits that they really want allows you to show that you appreciate and value their work — which in turn leads to motivation. Not only this but when people feel that their personal lives are being improved as a result of their work, it brings positive connotations to the workplace.
For example, when an employee experiences a reduced waiting time to see a GP due to their online GP service, they think of work. This makes the employee think positively about their work, but also makes them more motivated to work hard, as they want to do well for those who do well by them.
Being able to exercise close to work or home is important for many people, but gyms and exercise classes can become an extra, unaffordable cost. As health and wellbeing for your employees should always be a priority, by offering discounted gym memberships, you can ensure that you are doing everything you can to keep your workforce fit and healthy.
You may also experience an increase in productivity as result of improved wellbeing due to the positive mental and physical impacts. Although many companies have a minimum number of days that employees must take as annual leave, as well as the usual maximum, the ability to buy or sell annual leave grants people more flexibility and is a benefit favoured by many.
When they buy extra annual leave they'll save money on national insurance contributions and the employer will save money on pay-packets. So, it's a win-win. Including private medical insurance on a flexible benefits plan gives everyone the opportunity to access the benefit - not just directors. In recent years it has become more difficult to see dentists on the NHS, and many now choose to see dentists privately. This means that offering dental insurance, which covers routine appointments and additional treatments like fillings or repairing damage after injuries, can be an excellent addition to a flexible benefit plan.
These are usually offered on a salary-sacrifice basis and enable the loan of a new bike and safety accessories to those who cycle to work or who want to cycle. There are numerous benefits for both the employer and the employee. The employee will save money on the bike and the accessories, which can often become expensive for road suitable bikes, but this will also significantly reduce commuting costs and will improve health and wellbeing.
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. As elaborated in the example of James, a flexible benefits plan helps save taxes.
This restructuring helps employees to reduce their tax liabilities to a great extent. By offering a flexible benefit plan, employees can get a complete breakdown of the perks on offer. 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. However, the UK government states that workers must never receive less than the minimum wage in cash , under any circumstances. The UK Government website provides guidance about salary sacrifice agreements and their tax implications for employers.
This guidance explains how a salary sacrifice arrangement works , the kinds of benefits that can be offered and their effect on employees' tax and National Insurance contributions. Here are some of the most important points:. The terms "perks" and "flexible benefits" are used interchangeably.
But there are significant differences. As we mentioned before, payment in kind or flexible benefits are ways employees can get more out of their salary. Perks, on the other hand, are linked more to talent retention strategies , employer branding, etc. Perks are complementary to salary, and the cost will be covered by the company.
In contrast, flexible benefits can be exchanged for a salary reduction salary sacrifice and are paid for by the employee, albeit at a discounted rate. A flexible benefits plan can bring significant advantages for employers and employees alike. They have an economic impact, of course, but they also have a positive social impact, by improving commitment, motivation and well-being.
There is a range of different products and services that can be included in flexible benefits schemes. It's up to the company to choose from the wide choice available:. This is a classic example that has been around for a long time. Meal vouchers give employees the possibility to save some or all of the money spent on food during the working day.
Each company decides how much each voucher is worth; there is no maximum amount in the UK, but companies who provide them to all employees do not have to pay tax on them. Some meals are not exempt from tax. These can include unusually higher value meals that are consumed off-site, in a restaurant or hotel or are only made available for selected staff.
Nevertheless, it does save the employee money and is also very convenient , as they can enjoy lunch without having to prepare it themselves for the entire week. Medical insurance is also often included in a flexible benefits package.
But employers do have to report employees medical or dental treatment insurance to the tax authorities if they are part of a salary sacrifice agreement.
Some companies negotiate with insurance companies to enable their employees to access the service at a lower cost, even though the organisation doesn't pay the premium. Childcare vouchers are usually designed for employees with children under three years old. Most workplace nurseries and childcare voucher schemes are exempt, but there are different rules depending on where the childcare facility is and how it is paid for. Apart from the money employees save, this kind of benefit helps employees manage work-life balance , something that is becoming increasingly more appreciated.
Encouraging employees to lead a healthy lifestyle by providing access to sport and recreation facilities is a form of flexible benefit.
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