One of the most important shifts in employment benefits today is the growing demand for flexibility. More and more employers are rethinking how they offer benefits, because every employee has different needs, and those needs evolve over time.

One of the key tools to create this flexibility is the Individual Choice Budget (IKB). This is a flexible budget that gives employees more control over how they use their employment benefits. It can be funded from multiple sources and used for a variety of purposes. The idea is simple: give employees more say in their benefits and let them choose what fits their life, career stage, and priorities.

"For example, if I’ve just become a father, time off might matter more to me than money. Before that, I may have preferred selling my vacation days for extra pay. These preferences shift over time, that’s why I believe flexibility in employment conditions is essential."  - Paul Brink (owner Not Secondary).

The different definitions of IKB

If you look at the market, many different companies have a form of an IKB, either imposed by the collective labor agreement (cao) or initiated by themselves. Also, many different names/definitions are circulating. At Not Secondary, we have seen the following definitions come up often. 

• Individual Choice Budget

• Personal Choice Budget

• Multiple Choice System Employment Conditions

• Balance Budget

• Sustainable Employability Budget

• Flexible Choice Model

Although the names differ, it fundamentally revolves around flexibility and self-management within the employment conditions package.

The different types of employers and the IKB

Not only are there different definitions, but employers also take very different approaches to implementing an IKB. Here's a quick overview of the types we commonly see:

1. Companies with their own software: pioneers such as Achmea have developed their own systems.

2. Paper systems: some companies still use paper documents for choices.

3. External benefits software: Employers using software like Alleo.

4. Thematically bound choice budgets: Companies that allocate budgets to specific themes such as vitality or mobility.

5. Cao-mandatory systems: Employers who are required to offer a choice budget according to the cao.

6. Employers who do nothing: Companies that have not yet implemented an IKB.

To give an example of an industry that is required by the cao to offer an IKB, I have the following passage from the mental healthcare cao: 

Article 17 choice-based benefits system

The employer must offer a choice-based benefits system within the framework of the Work-Related Costs Scheme (WKR). This allows employees to personalise their benefits package by exchanging certain employment conditions (sources). When doing so, the value of the exchanged source must match the value of the selected benefit. A core example of this is the ability to buy or sell additional vacation days which is always included in the system.

This creates a clear obligation for employers to offer something that resembles an Individual Choice Budget (IKB). In recent benchmarking within the mental healthcare sector, it’s clear that employers covered by the collective labor agreement (CLA) often highlight the presence of a choice system in their job postings. However, there are notable differences, both in how these systems are named and in the actual benefits offered.

Some CLAs also give employers the opportunity (rather than the obligation) to introduce more flexibility, which is often implemented through an IKB. For example, the Collective Labor Agreement for Gas Stations and Car Wash Companies includes the following provision:

Holiday allowance at another time

Employer and employee can agree, deviating from paragraph 1, that the payment of the holiday allowance takes place monthly, or is calculated over another period of 12 months.

Offering flexible holiday pay is a classic option among the possibilities within the PKB, and by offering a PKB with such an option, employers falling under the Collective Labor Agreement for gas stations and car wash companies also become compliant with that part of the cao. Thus, offering a PKB can help some employers to comply with the provisions of the cao. 

What choice options are available within the IKB?

Now that we know what types of employers exist in relation to the IKB, it is interesting to look at the content of the PKBs that are offered. There is also much variation here. See below the list of the different choices we have often encountered in practice with Not Secondary. 

An IKB offers various choice options, including:

• Gym memberships

• Buying and selling vacation days

• Flexible holiday pay

• Supplementary pension savings

• Additional mobility allowance

• The lease bicycle

This is a selection of common options; the list of all choice possibilities we have encountered is of course much broader. There are also more creative options; for instance, at one of our clients, you can use the IKB to purchase sportswear at a reduced price with the employer's logo on it. 

What funding sources are available for the IKB?

And of course, choices need to be financed. Here too, you see differences in the funding sources that are tapped into for the various choices. See the overview below: 

• Holiday pay

• Overtime

• Bonus

• (partial) Non-statutory vacation days

• Mobility budget

• Personal training budget

• Salary and annual bonus

• Fixed allowance (expense reimbursement)

What is currently a clear trend is that employers are making visible how much percent the IKB is on top of the salary. You are increasingly seeing this in job postings, especially in the banking and insurance sector.

Conclusion

We now know four things:

• The different definitions;

• The different employers; 

• The choices;

• The funding sources.

We can link various key insights to these aspects, namely the following: 

Key insights: 

• Communication must be well organised; employees should be able to make choices quickly and easily;

• Administration is a thing;

• There must be enough choices to cater to all generations in the workplace;

• The funding sources must be significant so that choices can be made regularly; 

The IKB offers a flexible and inclusive way to align employment conditions with the individual needs of employees. Through clear communication, good administration, sufficient choice options, and significant funding sources, an IKB can be successfully implemented and valued by employees.

For more information on how to implement an IKB within your organisation, you can contact Alleo. We are happy to help you and offer various options to optimise the employment conditions package.

This guest blog was written by Paul Brink, owner Not Secondary.