What are the advantages and disadvantages of a cafeteria plan?

Answer 1

Advantages of Cafeteria plans (Flexible Benefit Plans)

• Employees choose benefits to meet their needs, and value these benefits more highly.
• Employers and employees share the responsibility for providing benefits.
• During periods of change (including merger and acquisitions), flexible benefits help to harmonise rewards.
• Employers provide benefits at a known cost that is fixed regardless of the choices that employees make., so allowing them to cap future benefit costs.
• Employees have a true idea of the full worth of the benefits package they receive and employers do not provide benefits that are not valued.
• Employees are given a sense of control and involvement by having a choice.
• Dual career couples avoid having benefits duplicated by their respective employers.
• Employers are seen to be more responsive to the needs of an increasingly diverse, demanding and ageing workforce.
• A competitive benefits package is valuable in attracting and retaining key personnel.
• The awarding of benefits such as company cars becomes less divisive.
• Employers' demands for flexible working practices are more justifiable if employees enjoy flexible benefits.
• Helps to align the total reward strategy to the HR and business strategies.

Disadvantages of Cafeteria Plan (Flexible Benefits Plans)

• Employers find them complex and expensive to set up and maintain (although new technology is reducing both the cost and administrative burden).
• The choices made may cause problems both to employers and employees