Flexible allowance

What are flexible allowances?

A flexible allowance (sometimes known as a “flex fund”) is when you allocate a sum of money to employees to spend on benefits of their choosing. 

For example, your business might give each employee £200 a quarter to spend on anything from books to sports clubs or entertainment packages. While one person might opt out of private dental care, another might choose to buy a few extra days’ holiday. Here are some companies offering the best benefits out there.

While traditional employee benefits have been criticised for being too ‘one size fits all’, flexible allowances can be an effective way for employers to give workers more control over their hand-earned compensation. Happy employees, satisfied employers.

What are the advantages of flexible allowances?

It’s not just employees who can benefit from flexible allowances, but employers too: 

  1. Improved employee engagement - It’s common for employers to see improved employee engagement once they start providing flexible allowances. It’s no surprise that giving employees the power to decide how to spend their benefits increases morale and motivates them to work harder as they feel valued and respected.

  1. Increased retention rates - Naturally, with improved productivity comes better retention. Flexible allowances can make it easier for employers to attract and retain top talent, as the best candidates are likely to want more  more personalised packages.

  1. Lower costs - By offering flexible allowances, employers can avoid the costs associated with providing traditional benefit plans and services. These often end up costing businesses more than they’re worth, as not every employee is going to use the same benefit. For instance, some will prefer a gym membership over a mentoring course. With Ben, employers save 24.7% on benefits on average (and they slash the boring benefits admin, too).

  1. Convenience - Employers don’t have to waste time managing complex benefit plans and dealing with providers, meanwhile employees can use their allowances however and whenever they like.

The different types of flexible allowances

Flexible allowances come in three forms, so you can choose the one that best suits your business.

  1. Self-managed allowance: This allows employees to choose how they spend their allowance (within certain parameters set by their employer, of course). The upside is that employees enjoy the freedom to choose how they use their money, whether that’s for transportation costs or new clothes.

  1. Essential allowance: These are designed to cover basic necessities, like childcare and healthcare. This type of allowance is usually allocated to employees upfront when they start a new job and is used to cover essential costs, like private medical insurance.

  1. Targeted allowance: These are allocated to particular groups of employees and are used to cover specific costs. For example, you might offer your summer interns a study allowance, or your remote workers a daily lunch budget.

How do I set up flexible allowances?

Ready to set up flexible allowances at your workplace? It’s pretty simple (as you’d expect!). 

The first step is to decide which employees will be eligible for the allowance. Will the benefits be open to everyone or specific groups only? You should also decide what type of allowance will be offered and create guidelines for how the allowance will be used. For instance, you might choose to put more money towards a relocation package than towards a learning budget. Or maybe you think it’s important to invest in your employees’ futures, so you want to increase the company’s pension contributions.

Then, you’ll need to decide on a budget. Make sure you have input from key stakeholders on this, as you don’t want to have to backtrack and change the budget down the line. Now is also a good time to consider how to (and who will) manage the allowance and track employee payments going forward.

Last but not least, make sure you’re shouting about your flexible allowances on your job descriptions and Careers page! They’re a great way to attract talent so don’t let them go to waste.

Need some inspiration? Check out the Ben Mastercard and Marketplace, which allow your team to choose the benefits they truly want, wherever they are in the world.

Join teams around the world getting 90%+ engagement with their benefits programmes

Get any benefit, in any country, and make it flexible, all without the painful admin. Budget-friendly. No hidden fees. No surprises.