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From Where We Sit

Flexible benefits, take your pick!

Ramilito L. Nañola Ramilito L. Nañola

A flexible benefits plan is like ordering a cup of coffee where the cashier will give you a plethora of choices and the barista will make each beverage according to your preferences. Hot or cold? Short, tall or grande? Regular, low-fat or non-fat? Caffeinated or decaffeinated? White, brown or Splenda? To make it even more personalized, you can even use your own mug.

Flexible benefits plan—popularly known as cafeteria plan—has been around since the late 70's, but most of the companies in the Philippines are still into traditional "one-size fits all" benefit plans. Recently, flexible benefits plan is getting traction. Why do companies nowadays need to consider adopting flexible benefits?

Companies realize there is a war on talent—not just on hiring new employees but also on retaining good ones. Most, if not all, job seekers these days are concerned about not only the salary package but also about other the benefits employers offer. A good remuneration package will assure employers a better chance to attract the kind of talents they seek to bring in to their organization. BPO companies and other multinationals are disciples of flexible benefits. Some of the not-so-common benefits offered by these entities include health cards of the employees, which are only awarded to the top Health Maintenance Organizations (HMO), tuition subsidies, gym memberships, generous medical reimbursements per sickness on top of those medicines already covered by HMO during confinement, housing assistance, free overseas or local trips including generous pocket money for top performers, free lunch and dinner all year round for all employees, long-term overseas work secondments, etc.

Flexible benefits plan addresses the issue of diversity among employees—from age, hobbies and life priorities. Having a workforce that includes a family person, a health buff, a food lover, a mountaineer, or a traveler will require companies a distinct set of benefits.

But how does a company transition from the traditional one-size-fits-all benefits plan to a flexible benefits plan?

First, for each employee, quantify the peso equivalent of the existing benefits plan. This process of data assessment is the most tedious part and it is the duty of human resources personnel to do so. Normally, this is only done when the management of the company has already decided on the transition to a flexible benefits plan.

Secondly, identify the core benefits. These are benefits that are very important to employers such as health and group insurance, annual rank and file check-ups, executive check-ups, medical allowances, sick leaves, vacation leaves (minimum of five days under the Labor Code), among others. Core benefits are non-flexible and not convertible to cash. Hence, each employee must avail for himself or purchase these benefits.

Lastly, identify benefits that are non-core and fully flexible. These can be in the form of transportation allowance, communication allowance, and vacation leaves more than five days (some companies provide 12 days of vacation leave in a year, which can be accumulated for two or three years).

The company has to create or develop a platform where the employees can purchase the array of benefits. However, there are already a number of providers in the market that can assist a company in converting to a flexible benefits plan. They can set up or provide a platform where a wide array of benefits can be chosen.

These platform providers help the companies in converting the peso value of the benefits into units or points. Say, if the converted peso value of benefits of a certain employee is P30,000 which is equivalent to 30 points, the employee has to use these points to avail first of the core benefits by purchasing them via the platform.
Once the core benefits are purchased, the employee could now select and choose from an array of benefits that fits the lifestyle and preferences.

Assuming further that the employee only utilized 25 points, the remaining five points can be converted into cash at the end of the fiscal or calendar year. However, if the employee purchased more than the allocated benefits, such excess will be deducted from his or her salary.

Companies are always looking for competitive advantages. Flexible benefits plan is deemed by some companies as a leg up on the competition. There is a high cost for hiring and training employees and even higher cost for replacing good and potential leaders of the companies. Millennials are already in the workplace and they have different views on work and lifestyle. The flexible benefits plan is becoming more attractive in attracting and retaining talents.

Ramil Nañola is a Partner, Audit & Assurance of P&A Grant Thornton. P&A Grant Thornton is one of the leading Audit, Tax, Advisory, and Outsourcing firms in the Philippines, with 21 Partners and over 700 staff members.


As published in Manila Times dated August 31, 2016