Additional Funding Scheme
Use
An Additional Funding Scheme is a Flexible Benefits scheme where the benefits element of an employee’s package is totally separated from his or her salary. As an organisation, you allocate a flex fundto each of your eligible employees, comprising a fixed sum of money available for employees to spend on Flexible Benefits.
You offer a comprehensive list of benefits to your employees from which they can make their benefits selections, paying for these with their flex fund.
Usually, as an organisation offering Flexible Benefits via an Additional Funding Scheme, you prescribe a certain minimum level of benefits that employees must choose. Each of these automatic benefits is known as a core benefit.
You offer these core benefits partly due to legal requirements (for example, statutory holiday legislation), and partly because you wish to provide a minimum level of benefits coverage for all your employees.
Examples of core benefits that may be offered by you in this funding scheme are:
20 days holiday
Private Medical Insurance (PMI) for employee only
Two times salary as life insurance coverage
Prerequisites
When you choose to operate an Additional Funding Scheme, you must ensure that the standard value of all benefit options within the same benefit plans is zero.
Private Medical Insurance
Option |
Standard value |
Flexed value |
Employee Basic |
GBP 0 |
GBP 100 |
Employee Plus |
GBP 0 |
GBP 150 |
Employee + Spouse |
GBP 0 |
GBP 250 |
Additionally, each employee must be assigned a credit plan from which the value of the employee’s flex fund is derived. Before the actual
enrolmentof Flexible Benefits for individual employees, the Benefits Administrator must generate a
Credit Plans
infotype (0236) record for each employee by running batch programs. You create appropriate credit plans and define credit rules in the IMG Customizing steps, under:
Benefits Administration
Plans
Credit Plans
.
Features
Calculation of Flex Fund
The value of the flex fund available to your employees can be calculated in many different ways, depending on the requirements of your particular organisation. However, you normally use only one method of calculating employees’ flex funds during any single benefits year. The calculation method can be reviewed each year, either during the pay review process or in the pre-enrolment period before the next benefits year begins.
You can calculate the value of the flex fund available to employees, in the following ways:
Flex fund as a set percentage of basic salary
Flex fund as a set value, dependant on grade or position of employee in your organisation
Flex fund based on value of the benefits held by the employee prior to the introduction of Flexible Benefits. This value is then increased by a certain percentage in each new benefits year
Flex fund as a percentage of base salary, plus the value of an employee’s existing benefits (for example, 23 days holiday), and less the value of an employee’s core benefits (for example, 20 days holiday)
Individual calculation per eligible employee, which is later uploaded into your Flexible Benefits system
Flex Fund Surplus
If an employee does not spend the total value of the flex fund on Flexible Benefits, the surplus value of the fund can be handled in one of the following ways, depending on the rules governing your organisation’s Flexible Benefits scheme:
- Surplus value of the fund is forfeited
- Surplus is paid to the employee as a salary adjustment
- A percentage of the surplus is paid to the employee as a salary adjustment
- If the surplus is less than a certain percentage of overall fund, it is paid in full. Otherwise, only a percentage of the surplus fund is paid
Flex Fund Deficit
Where your scheme allows, an employee may be permitted to choose Flexible Benefits to a value greater than the value of his or her flex fund. In this situation, a flex fund deficit is produced. This would normally be deducted from the employee’s salary, as per the scheme rules. As an organisation, you would normally set a maximum percentage deficit which employees are permitted to accrue.