A cafeteria plan, also known as a flexible benefits plan, allows employees to choose from a variety of benefit options to customize a benefits package that best suits their individual needs. Benefits can include health insurance, retirement contributions, and tax advantages. This type of plan gives employees more choice over their benefits than a standard employer-provided package. Employers also benefit from cafeteria plans by gaining flexibility to offer new benefits quickly and control costs by requiring employees to pay more for higher-cost options. Common types of cafeteria plan benefits are core benefits that all employees receive, flexible benefits that employees choose, and voluntary benefits they elect to purchase.

1. Cafeteria Plan

2. • An employee benefit plan that allows staff to
choose from a variety of benefits to formulate a
plan that best suits their needs. Cafeteria plan
options may include health and accident
insurance, cash benefits, tax advantages and/or
retirement plan contributions.
Also known as "cafeteria employee benefit plan"
or "flexible benefit plan".

3. • Similar to a cafeteria where individuals select
their food of choice, employees may choose
benefits of their choice. These plans become
more useful as diversity within workforces
continues to grow. For example, the benefit
needs of young families may differ greatly
from those of a single person.

4. • A cafeteria benefit plan is an arrangement allowing
employees to choose which types of benefits they would
like rather than being handed a standard package by their
employer.
Some may choose to have more comprehensive health care
plans, others may be more interested in retirement
schemes or life insurance. These cafeteria benefits, also
known as flexible benefit schemes, have advantages for
both employees and employers. Some companies offer a
flexible benefit budget to their staff allowing them to “buy”
the benefits best suited to their needs. The employees can
then pick and choose what is best for them and companies
can offer new types of benefits more quickly as they don’t
need to extend them throughout the firm.

5. Flexible benefits schemes are also sometimes known as
cafeteria benefits.
• There are three main types of benefits plans:
core benefits, flexible benefits and voluntary
benefits. These describe the way benefits
offered, and are not types of benefits. For
example: Private medical insurance (PMI) can
be offered as core benefit, a flexible benefit or
a voluntary benefit.

6. • Under flexible benefits schemes staff can choose
their own benefits from a set range of benefits.
Often they can choose to upgrade certain
benefits in exchange for others.
Staff are given a flexible benefits budget that they
can use to ‘buy’ the benefits they want.
These types of schemes are very popular because
staff don’t have to take benefits they don’t really
want and can get benefits they do want.

7. • Often employers offer a wider range of benefits in a
flexible benefits schemes than they would in a core
package in order to accommodate the diverse needs of
staff.
It allows employers to offer ‘new’ benefits much more
quickly so they are seen as leading employers.
Employers can control costs because if any benefit rises
in price then the employee has to ‘pay’ extra.

8. • Flexible benefits plans are very popular with companies
who are merging or who are buying/being bought because
it is easy to integrate the packages.
• Many flexible benefits schemes are offered using salary
sacrifice arrangements.
• Flexible benefits schemes run for a set contract period
whereby staff can opt into or out of employer-paid
benefits, select employee-paid benefits or take cash. This is
not the same as voluntary benefits which are discounted
products made available through the employer and the
contract is between employee and provider. In some cases,
if employees do not wish to take any of the benefits on
offer, they can choose to keep the cash.