Would you rather have a telephone or bicycle than pay? The advantages and disadvantages of the flex plan

1. Flex what?

Flex budget, flexible reward plan … The child has many names, but the bottom line is that employers are looking for a way to also give the salary to the employee in other ways. For example, in the form of extra paid vacation days or other benefits, such as an iPhone or bicycle. You can even convert part of your gross salary to lease a car, but many employees are given the opportunity to spend those money differently, especially with the end-of-year bonus or when awarding a bonus.

Why does a flex plan exist? Because the employees ask for it, say the social secretariats that roll out the system for those companies. To avoid taxes and social contributions, the unions say.

“However, I don’t think companies are introducing this to reduce wage costs themselves,” says Xavier Baeten, Professor of Remuneration Management at Vlerick Business School. “In most cases, the total wage cost remains the same. They do want to offer their employees more value for money, or make it possible to take extra vacation days. Research shows that companies that have such a plan have more productive employees.”

2. How does it work?

“Behind our net salary there is much more than just the amount that we receive in our account,” says Kathleen Veuelen of SD Worx. “If you receive 1,000 euros gross, your employer will already have to pay about 270 euros in social security contributions. That 1,000 euros already costs your company 1,270 euros. And on that original 1,000 euros you also pay social security contributions and taxes. This way you will net less than half of that 1,000 euros. The good news for you is that many employers make that 1,270 euros available in full via the flex plan, without you losing much on it. So you can use that money to buy an iPhone, extra paid days off or a bicycle. If you still want to see your money paid to your account, as before, you can of course still do so.”

3. For whom?

According to SD Worx, one employee in eight in our country is offered this type of flex budget. “This is therefore not possible in every company or in every sector,” says Kathleen Veugelen. “Not everyone receives an end-of-year bonus and those who do receive one are often bound by a whole series of legal provisions. Each sector has also agreed in social consultation whether it is possible to convert the year-end bonus into a flex budget.”

Even within the same company there are sometimes differences: “In some companies, the white-collar workers can convert the year-end bonus, but the blue-collar workers cannot. Sometimes companies just give up completely, sometimes they find a solution to make it work anyway. We do see that the system is still on the rise. If we introduce it in a company in an industrial zone, many other nearby companies quickly follow. In any case, it is theoretically possible in any type of company: from an SME with twenty employees, to large companies with several hundred employees.”

4. What are the cheapest options?

Depending on which choice you make, you will have to pay more or less taxes and social security contributions. Although with many benefits that will be less than the full pot that you pay on your wages. “The most economical options are therefore the bicycle, subscriptions to public transport and training”, says Katrien Nijs of Attentia. “You pay little or no taxes on that, so you can spend the entire 1,270 euros from earlier. With an iPhone, for example, you still have to pay some taxes, so the benefit is somewhat less. You then have to use the bicycle regularly to commute, although that can also be part of the route. And the courses must be relevant to your work. Cooking a workshop will be difficult. Language lessons are perhaps a bit easier to justify.”

5. What about my pension?

It is certain that your pension can suffer from that fiscal juggling. Anyone who pays less social security will receive a smaller pension later. However, this does not apply to every benefit and not to every wage. “It’s actually a very complex matter,” says Kathleen Veuelen. “Those who had more than 63,944 euros in gross annual income in 2021 are at the pension ceiling. Choices in the flex plan will then no longer affect the individual pension, because you will then already accrue the maximum. And furthermore, some benefits are less detrimental than others. Those who ‘buy’ extra vacation days with their premium will not see any impact on their pension. If you buy a bicycle on which no social contribution was paid, you do.”

How heavy that impact is, is different for every benefit and every income and family situation. “But for a bicycle that an employee with a family of two children and an income of 3,000 euros gross leases for 1,200 euros per year, you will lose about one euro per month in pension, per year that you lease that bicycle.” At Attentia, it was calculated differently: suppose you pay up your gross premium of 3,000 euros in full, that saves about 3 euros per month on your later pension. If you do that for a full career, you will already arrive at almost 130 euros. “Although practice shows that hardly anyone spends their full premium every year,” says Nijs.

6. What if I suddenly change jobs?

There you are with that nice lease bike, but suddenly you get an offer from your employer’s direct competitor. “That can cause problems,” says Kathleen Veuelen. “Or you take over the bike at the residual value at that time. Or you return the bike. Only then a termination fee for the lease contract must be paid. This is actually the employer’s responsibility, but this often leads to discussion, especially if it was a dismissal for urgent reasons. That is why we recommend writing down all conditions in a clear policy.” Such agreements are also important for insurance companies. “Sometimes you can just take over the insurance without waiting time, sometimes there are other rules, but that is all neatly described in the conditions.”

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