What is Flexible Pay?
In a salary structure, a Flexible Benefits Plan (FBP) is a facility for employees to modify components of CTC (Cost to Company) such as medical expenses and transportation. CTC includes all salary components such as HRA (House Rent Allowance), Medical Expenses, Basic Salary, DA (Dearness Allowance), and so on. The Flexi Benefit Plan's main goal is to give employees the freedom to choose. To save taxes, a Flexi or Flexible Benefits plan is introduced, which includes the following components:
- Medical Expenses
- Telephone Bills
- Food Conveyance
Benefits of Flexible Pay
1. Employees who have access to flexible pay have less financial stress
Worrying about when money will arrive to pay bills or purchase necessities can be stressful for employees. Concerns about a lack of funds may cause them to become distracted from their work, and when they lose focus, productivity suffers.
Having flexible pay options allows employees to have better cash flow, which reduces worries about making it to the next payday and allows them to save and budget more easily.
2. Payroll teams are less burdened by flexible pay
Because flexible payment technology is still relatively new, the platforms that support it have automated the process to make it more efficient, allowing you to focus on other tasks. Switching to a flexible pay provider can result in significant time and cost savings for a small business owner who does not have a dedicated payroll department.
Many flexible pay tools also provide more advanced mobile payroll capabilities, allowing payroll administrators to avoid being tethered to their desktop for hours when attempting to run payroll. Admins can view a payment request on their phone and approve it with a few clicks, whether they're in a meeting, travelling to a job site, or wrapping up for the day, thanks to mobile payroll capabilities.
3. New employees are not required to wait for payment
When new employees join the company, they face a 1 to 3-week wait for their first pay check. During the waiting period, paperwork and bank accounts are frequently completed and verified.
However, because most HR and payroll paperwork can now be digitised, these waiting periods are no longer necessary. But, the waiting period for bill dates remain unchanged, leaving new employees with a pay gap. This can be disastrous for workers who live paycheck to paycheck or who have been out of work for an extended period of time.
When the company provides flexible pay options, new employees benefit. They'll be able to get paid for their work in days rather than weeks.
4. Flexible pay is a retention incentive for employees
Many people have taken on side hustles or gig jobs to supplement their income between paychecks and gain immediate pay perks. Rather than losing talent to the world of freelance and gig work, a company can compete with the instant gratification that employees get from working for Uber, DoorDash, Instacart, and others by offering the same payment timing.
This may assist the employee in channelling their skills and focusing on their primary job rather than sharing them with another job. Flexible pay benefits can also boost an employee's sense of loyalty to their primary employer, resulting in higher retention.
Flexible Pay vs. Earned Wage Access
Earned wage access apps are the most common source of accelerated pay. Employees can use these apps to request their earned pay on an as-needed basis, usually for a fee. Most also only allow you to access a portion of your earnings rather than your entire earnings.
While these apps can assist employees in the event of an unexpected expense, they do not give people complete control over their pay frequency, and they can be prohibitively expensive for people who are already struggling to make ends meet. They're a band-aid for a bigger problem: a two-week pay cycle that's out of date.
Earned wage access refers to having one-time access to earned wages when they are requested. Flexible pay is all about having more options and getting paid more frequently.