Cafeteria system

Cafeteria system
See also
Ancillary benefits Illegal work Placement fee Earned Premium Quality of worklife Stock insurance company Employee leasing Target population Commercial mortgage broker

The cafeteria system is one of the elements of flexible remuneration of employees. The essence of cafeteria systems is to give the employee the opportunity to choose elements including non-payroll benefits, which a given employee can use as part of the remuneration.

The use of cafeteria systems was initiated in the United States, where due to the high level of wages, further increases became impossible and ineffective. As a result, the companies were forced to change the remuneration policy. Currently cafeteria systems are widely used.

Reasons for introducing cafeteria systems

Fig.1. Cafeteria system implementation and operation

Cafeteria systems, like other non-wage benefits systems, are used as a means of influencing employees. They become a particularly important element in the face of changing the labor market from the employer's market to the employee market. However, there are a number of other reasons why companies decide to introduce cafeteria systems in their offer. These include mainly  :

• increasing the employee's loyalty towards the organization,
• maintaining valuable employees in the company,
• easier recruitment of new employees,
• building a positive image in the eyes of employees (the so-called image of a caring employer),
• preferential terms of the services offered (due to the large scale),
• the possibility of using tax benefits (in connection with non-cash benefits).

Basic principles for the construction of cafeteria systems

According to the best remuneration practices, cafeteria systems should be built based on a series of rules. It should be remembered that as with any employee remuneration element, non-wage benefits systems must be calculated accordingly, and the organization should be aware of their "profitability".

The scientific literature also indicates other key guidelines that should be taken into account when implementing cafeteria systems:

• the elements from which the employee makes his choice should be within the amount indicated in the internal regulations of the employer,
• some of the elements of the cafeteria system may be granted to an employee only if certain conditions are met (e.g. when the employee deserves a bonus, on the basis of a bonus),
• certain selected elements may be granted to a permanent employee, for example, a coal allowance (then part of the cafeteria system is treated as a fixed remuneration),
• in all options, the choice of benefits is limited to a strict list, clearly indicated in the internal regulations of the employer,
• in internal legal documents, the percentage share of the cafeteria system in relation to the basis of remuneration should be specified in detail. Such indicators may be the same for all employees or may differ depending on the position or grade occupied,
• the groups of employees who can use the offered cafeteria should be clearly defined.

The most popular elements of cafeteria systems

Nowadays, when cafeteria systems are gaining popularity, the offer of benefits that an employer can include in the list of cafeteria is extremely wide. Certain benefits offered, such as medical care or sports card, have become an absolute standard, which is no longer considered by employees as an additional benefit, but a mandatory benefit. However, new proposals still appear, and companies often outdo each other in offering ever more interesting items on their list of benefits. Here are some of the most common elements used in cafeteria systems.

Security benefits:

• private medical care - increasingly offered to all employees of the company regardless of their position. Typically, an employee can purchase packages for members of their family on preferential terms,
• life insurance - usually covered by the employer. Include random events and unfortunate accidents. Due to the large scale of such insurance, they are characterized by very preferential conditions,
• employee pension schemes - once enjoying high popularity, and in the current market situation (high dynamics on the labor market) not so common. By definition, these programs allow you to accumulate future funds for retirement, financed in part by the employer.

Material benefits:

• car - in the context of cafeteria systems, we are talking about cars for private use. It is a benefit often offered only to a few employees including senior management positions. Increasingly, however, employers offer preferential forms of leasing also for regular employees,
• meal supplements / lunches - offered in the form of paid meals at the workplace or prepaid cards to cover the costs of meals consumed at work. More and more often, organizations also offer various types of benefits for employees in the form of a kitchen for employees provided with free sweets, fruits, vegetables,
• general / housing loans - granted to employees on preferential terms. They are a particularly advantageous form for the employer due to the long-term relationship between the employee and the company,
• additional paid time off - occur in the form of an additional number of days paid leave for an employee. Often, this element is related to the employee's experience (such days arrive with successive years),
• subsidies for holidays - implemented in the form of co-financing or full coverage of costs,
• sports cards - usually in the form of open passes for sports facilities in the country or city,
• prepaid cards for a selected group of stores - an increasingly frequent element of cafeteria systems due to its high flexibility. It consists in the implementation of cash transferred to a pre-paid card, which can be paid in strictly defined places (usually of a cultural and educational nature),
• meal vouchers - similar to a pre-paid card, they can only be used in grocery stores.

Benefits of using cafeteria systems

A cafeteria system, which was created in a thoughtful way, and therefore one based on real needs and expectations of employees, can bring many indirect and direct benefits to employers. It should be particularly emphasized here:

• opportunity to obtain information on the hierarchy of employees' needs,
• flexibility in changing the offer that allows for ongoing adaptation to the needs of the organization and employees,
• maintaining the proper structure and relationship of wages,
• reduction of labor costs by not having to pay social security contributions, from some elements of the cafeteria system,
• providing employees with the opportunity to choose an offer tailored to their needs.

References

• Nieżurawska, J., Karaszewska, H., & Dziadkiewicz, A. (2016). Attractiveness of cafeteria systems as viewed by generation Z. International Journal of Social, Behavioral, Educational, Economic, Business and Industrial Engineering", WASET, London, 1242-1246.
• Urbancová, H., & Šnýdrová, M. (2017). Remuneration and employee benefits in organizations in the Czech Republic. Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, 65(1), 357-368.
• Horváthová, P., & MIKUSOVA, M. (2011). Modern System of Employees Remuneration and its Use by Organizations in one of Czech Republic Regions. International Journal of Social, Behavioral, Educational, Economic, Business and Industrial Engineering, 5(1).