Flexible Benefit Plans: Advantages and Disadvantages

Child holding parent handsMeeting the needs of employees is becoming one of the most important aspects of both small and large businesses. Understanding that every employee is different and have different needs, using a benefits plan that blankets all employees may not be as effective as it used to be. Knowing that all employees are different has led to a great deal of employers moving towards a flexible benefits plan.

Flexible benefit plans, or flex plans, come in a variety of options, which allow the employee to have more control over their plan and, in turn, control their lives in a better way. As these plans do allow employees to have greater control, there are some advantages and disadvantages for both the employer and employee, which will be the focus of this article.

Employer Advantages

1. Meeting Employee Needs

Having a diverse workforce regarding culture, age and personality has advantages and is becoming the norm in the workplace. With a diversity of employees comes a diversity of needs for employers to meet. Each employee is not like the other and neither, are their needs both inside and outside of the workplace. If an employer shows the effort to meet their employees’ needs, it can lead to greater productivity, improved employee morale, and reduced absenteeism. Additionally, if an employee has their specific needs met, they will be healthier, which will reduce sick time calls.

2. Recruitment and Retention

Businesses, especially small businesses, need to find a way to stand out to potential employees and encourage them to join the business. Flexible benefits tend to be something that potential employees are looking for right now, as it allows them to have more control over the issues that they have in their lives. Providing flex plans may be one way for employers to stand out amongst the competition and allow them to recruit top talent.

Once employers find top talent, flex plans can help keep the talent. Turnover is a major expensethat employers want to avoid and employees will be far less likely to leave a business when they are having their needs met in a practical way that does not require much effort on their behalf.

3. Financial Control

Flex plans allow for the employer to set a spending limit for each month, which leads to the business understanding exactly how much they will be spending every year on their plan. This control helps with budgeting at the end of the year and becomes a constant and expected expense for employers. Additionally, these benefits are tax deductible. Your business will be able to save money through this process, showing that there are has tangible and intangible advantages to report.

Employer Disadvantages

1. Setup Costs

If your business already has a traditional benefits plan in place, there are some considerations to be made before adopting a flex plan. Speak with your employees to see if your plan already meets their needs because changing plans will cost money and if it does not add extra value to your business, the return on investment may not exist. The process of designing and implementing is time-consuming, which is costly for a business. Also, a flex plan may also require some new technology to implement and keep track of your plan.

2. Sharing Information

Making changes to a benefits plan is difficult enough for a business, in terms of time and money, but it also needs to be accepted by the employees. Employees need to have an understanding of why the plan is changing and how it will affect them. Businesses that take the time to explain the benefits to their employees will see a great acceptance rate for their plan, but those who simply implement the change without communicating why, may face some backlash from their employees. If the employees do not embrace the changes to their plan, the advantages mentioned above will not be seen by businesses.

Employee Advantages

1. Control of Benefits and Expenses

Flex plans give control to the employee that allows them to meet their own needs or their family needs. For example, one employee may be single and not benefit from a family health plan but another employee may benefit greatly from a strong family plan. The first employee would be given the option of choosing a family plan and would likely avoid it, saving them money. A traditional benefits plan does not allow for this type of choice, leading to most employees paying for a great amount more than they need.

2. Extra Cash In-Hand

Flex plans allow for employees to pay for their benefits prior to being taxed. This means that they will be saving money from their taxes at each paycheque and they will also save during tax season. Employees will end up saving more money and having more of their personal needs met, which is a win-win situation that is often not seen in business.

3. Better Plan, Better Life

While having a healthy and happy staff is an advantage for businesses, being happy and healthy as an employee is also advantageous. Supporting and providing for a family can be difficult and stressful for an employee so having a plan that helps them meet their needs alleviates a large amount of stress. While, in the past, they may have had to save money for some unexpected catastrophe, a flex plan allows for them to protect themselves and plan for the future. Reducing stress allows for employees to feel happy inside and outside of the workplace, improving their mental and physical wellbeing.

Employee Disadvantages

1. Potential to Lose Money

Some flex plans do not allow for employees to save the money that they do not spend over the year. This would mean that employees would be putting in a certain amount of money each month for their plan and not being able to recoup that money if they do not use their benefits. While this could be seen as a major disadvantage for employees, having an ability to prepare for a worst case scenario is still advantageous, especially considering that some flex plans will include life and dental and/or vision insurance.

2. Lack of Portability

While some benefit plans are portable, flex plans are not. A portable health plan means that employees may be able to move their account over to a new employer if they decide to change jobs. Having no portability may lead to employees staying in a job simply because of their benefits, even if they do not enjoy their job. In an extreme situation, this could lead to disgruntled employees and more absenteeism. Businesses should ensure that their employees are satisfied with both their benefits and their job to avoid such a situation.


As the workplace becomes more diverse, so too do the needs of employees. Businesses that can accommodate to these needs will thrive in areas like employee satisfaction and recruitment/retention. Flex plans are a powerful tool to be used by businesses and have benefits for both employers and employers. With all major decisions, businesses should be sure to consider both the advantages and disadvantages of change prior to considering a change.