What is a Flexible Benefits Plan (FBP) in Salary?

In the salary of an employee, not everything is paid for the work he/she does. There are many components that are offered beyond the basic salary they get for the work they do. Some of these components lie under the flexi benefits plan. This plan basically explains the flexi benefits that an employee can claim if he/she makes such expenses. In this blog, we will learn about these benefits in detail and how to declare these benefits to get reimbursement. 

What is FB in salary?

A Flexible Benefits Plan (FBP) is a customizable employee benefits package. It allows you (workers) to choose from a variety of benefits to suit your needs. It includes certain key features like selection of health insurance, retirement plans, paid time off and others. Moreover, you can allocate a set amount of money or credits to different benefits. In this way, you can tailor the plan to your preference.

In traditional Fixed Benefit Plans, all employees receive the same benefits. However, FBP offers you personalization so it can address every individual’s personal needs and preferences. Also, this flexibility helps your company to cater to a diverse workforce with varying needs.

Common Components of Flexible Benefit Plan

Here are some common components which can be included in FBP:

1) Conveyance Benefits

Conveyance allowance or Benefits refers to the expenses that an employee has to make on a regular basis for official travel. Many companies declare it as a fixed component in the salary, like ₹10,000 or ₹15,000, to cover the daily up and down between the office and home or any other official work. Here are some of the types of conveyance benefits that a company may offer to an employee:

• Full Allowance

Fuel allowance is mostly offered to employees who go up and down from their personal vehicles for the company. For example, if there’s an employee who is in the sales team and has to reach out to distributors regularly, then the company will allow him to get his fuel expenses reimbursed by submitting the fuel bills to the company. 

• Company Car

A company car can also be a conveyance-based flexi component in Salary. While the function of the component is the same as reimbursing the fuel money, in this case, the reimbursement is made for using a company vehicle. In most cases, the companies tie up with local taxi service providers. Once the employee uses the service, he pays for the taxi and submits the bill, or the company settles the bill directly with the service provider. 

• Driver Allowance

Driver Allowance can also be added to the flexible benefits plan. It is basically the reimbursement for hiring a driver for an official trip. Let’s say an employer booked a driver to drive his car to another city office meeting, then the driver’s payment will be done by the company. For this reimbursement, the employee also needs to have a bull of driver’s service. 

2) Telephone or Wi-Fi Allowance

Other than the conveyance benefits, telephone or wifi allowance is a common allowance given to employees. In this allowance, the company pays for the postpaid or prepaid recharges made against the employee’s number or wifi. 

3) Food and Beverages Expenses

Meals and beverages (non-alcoholic) are often provided by the companies, mostly in the form of meal coupons. It is also included in a flexible Benefit plan; however, it remains tax-free up to ₹50 per meal for two meals a day. It means if a company gives two meal coupons per day worth ₹50 each, then it will be totally tax-free for the employee. 

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Advantages of Flexible Benefit Plan

There are various benefits of FBP related to tax and employee satisfaction. Let’s have a look at some of them:

1) Flexibility and Choice for Employees

A Flexi Plan Benefit (FBP) offers several advantages for both the employees and the employers. One of its main benefits is the flexibility and choice that it offers to employees. So, with FBP, you can select from a range of benefits that best suit your needs. Besides, this personalized approach lets you customize your benefits as per your lifestyle.

2) Tax Benefits Associated with Certain Components

You can also get tax benefits for certain components. So, you can save on taxes by opting for benefits like health insurance premiums or retirement contributions. As a result, you get a high take-home pay. However, it makes your tax planning even more efficient.

3) Enhanced Job Satisfaction and Employee Retention

Another significant advantage is the enhanced job satisfaction and employee retention. When employees feel their needs are being met through this FBP, they are more likely to stay with the company. This reduces the turnover and associated hiring costs for the company. In addition, it boosts the sense of being valued and increases loyalty.

4) Cost-Effectiveness for Employers

For employers, FBP can be cost-effective. By offering a range of benefit options, companies can control costs better. Besides, they can also avoid wasting resources on benefits that employees may not value. This approach leads to better budget management. Furthermore, it increases the financial efficiency of the organization as well.

Disadvantages of Flexible Benefit Plan

While the benefits of FBP are lucrative, there are some disadvantages as well. 

1) Complexity in Administration and Management

While a Flexible Benefits Plan (FBP) offers many advantages, it also comes with some drawbacks. One major disadvantage is the complexity of administration and management. The company has to manage and keep track of a variety of benefit options and individual choices. So, this can be a challenge for the HR department. Moreover, FBP often requires sophisticated software and additional resources to handle this complexity.

2) Potential for Confusion among Employees

Another issue is the potential for confusion among employees. With several choices, you can get confused. Moreover, you may also find it difficult to understand all the options and make informed decisions. So, this confusion can lead to dissatisfaction or even poor utilization of the benefits provided.

3) Risk of Inadequate Coverage if not Chosen Wisely

FBP also has the risk of inadequate coverage if you do not choose wisely. Hence, you will need proper guidance. In fact, you may also end up selecting benefits that do not fully meet your needs. So it can lead to a gap in coverage. Moreover, it can also leave you without important protection in critical situations.

4) Compliance and Regulatory Considerations

Compliance and regulatory considerations are significant concerns. Hence, companies must ensure that their FBP complies with the laws and regulations. This can be complex and also vary from region to region. Moreover, failure to adhere to these regulations can cause legal issues and potential fines. So, a company has to be careful while planning and regular audits are important to maintain compliance.

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What is an FBP declaration, and how do you do it?

The meaning of the FBP declaration is declaring the flexi benefits that an employee has taken and wants reimbursement for them. The process of FBP declaration is done through a dedicated portal in the employee self-service section of the HRMS. However, it applies to those companies where HRMS software is being used. Otherwise, a manual process is used to let the employee make an FBP declaration. 

Conclusion

In totality, this shows us what the flexi benefits plan is, along with its advantages and disadvantages. These benefits are undoubtedly helpful for employees and boost their satisfaction levels. However, to make it easier for the employees to make an FBP declaration, it is recommended that a good HRMS tool be used to facilitate the FBP declaration.