No Additional Funding Scheme Scenarios
Scenario 1
Employee Under-Spending
As an organisation offering Flexible Benefits to your employees, you administer a No Additional Funding Scheme and have implemented NI Cost Neutrality. You provide the following basic salary and standard benefits to an employee in a given payroll area, in the pre-enrolment period:
Provided by Organisation |
Value/Coverage |
Cost Equivalent: GBP per Annum |
Basic Salary |
GBP20,000 |
20,000.00 |
Personal Pension Contributions |
7% Basic Salary |
1400.00 |
Annual Holiday Entitlement |
25 days |
1923.07 |
Private Medical Insurance (PMI) |
Employee Only |
200.00 |
Life Assurance |
400% Basic Salary |
160.00 |
Total Cost to Organisation |
23,683.07* |
*Plus employer NI contributions where applicable.
During the annual benefits enrolment period, your employee makes the following adjustments to the standard benefits offered:
Provided by Organisation |
Value/Coverage |
Cost Equivalent: GBP per Annum |
Basic Salary |
GBP20,000 |
20,000.00 |
Personal Pension Contributions |
5% Basic Salary |
1,000.00 |
Annual Holiday Entitlement |
27 days |
2,076.92 |
Private Medical Insurance (PMI) |
Employee and Partner |
380.00 |
Life Assurance |
200% Basic Salary |
100.00 |
Sub-Total |
23,556.92 |
|
Value of Salary Adjustment |
+126.15 |
|
Total Cost to Organisation |
23,683.07* |
*Plus employer NI contributions where applicable.
In this example, your employee spends GBP126.15 less than the cost of his or her existing standard benefits. As an organisation, you pay this amount of under-spending back to the employee as a salary adjustment. This payment is called a flex adjustment, and can be shown separately on the employee’s payslip. This pay adjustment does not form the basis of any calculations such as daily rate for holiday, overtime rates or pension calculations.
You have other options for dealing with this flex adjustment amount. For example, you could instead increase the employee’s basic salary so the payslip reflects only one value, this being 1/12 th of GBP20,126.15 (original basic salary plus flex adjustment).
Within GB FlexBens, the original basic salary is known as the Pre-Flex Salaryand the original basic salary plus flex adjustment is referred to as the Post-Flex Salary.
Scenario 2
Employee Over-Spending
As an organisation offering Flexible Benefits to your employees, you provide the same level of standard benefits as in Scenario 1 to an employee. During enrolment, he or she makes the following adjustments to the standard benefits offered:
Provided by Organisation |
Value/Coverage |
Cost Equivalent: GBP per Annum |
Basic Salary |
GBP20,000 |
20,000.00 |
Personal Pension Contributions |
7% Basic Salary |
1,400.00 |
Annual Holiday Entitlement |
30 days |
2,307.69 |
Private Medical Insurance (PMI) |
Employee and Partner |
380.00 |
Life Assurance |
600% Basic Salary |
240.00 |
Sub-Total |
24,327.69 |
|
Value of Salary Adjustment |
- 644.62 |
|
Total Cost to Organisation |
23,683.07* |
*Plus employer NI contributions where applicable.
In this second scenario, the employee spends GBP644.62 more than the cost of his or her existing standard benefits. As an organisation, you could deduct this amount from the employee’s salary as a flex adjustment. Alternatively, you could decrease the value of the Post-Flex Salary so the employee’s payslip again reflects only one value, this being 1/12 th of GBP19,355.38.