A cafeteria plan gives employees the opportunity to choose between a range of pre-tax benefits and allows them to have the freedom to choose their own benefits. Within this plan, employees make a contribution of their gross income prior to taxes being calculated and deducted. This is a scheme run by the employer to offer employees a range of employment benefits. Staff can piece together which benefits are best suited to their own personal circumstances, (such as fitness plans, private health or life insurance, dental plans, etc.).
The cafeteria plan includes options such as group term life insurance, disability insurance and health savings accounts.
Adapting a cafeteria plan within as an employer can offer employees the chance to have a more flexible employee benefit, which compared to the other employee benefits scheme is a great advantage for the employee, and will in effect cause them to stay loyal to the organization.