Like pay, benefits are both a provision and a motivator. Todd E. is married and has three young children; his wife is at home full time. His Citigroup colleague Allison M. is married too, but her husband has a high-paying job with the federal government, and they have no children. Todd is concerned about having a good medical plan and enough life insurance to support his family in case it’s needed. In contrast, Allison’s husband already has her medical needs covered on his plan, and life insurance is a low priority. Allison is more interested in extra vacation time and long-term financial benefits, such as a tax-deferred savings plan.

A standardized benefits package would be unlikely to meet the needs of Todd and Allison well. Citigroup can, however, cover both sets of needs with flexible benefits.

Consistent with expectancy theory’s thesis that organizational rewards should be linked to each employee’s goals, flexible benefits individualize rewards by allowing each employee to choose the compensation package that best satisfies his or her current needs and situation. Flexible benefits can accommodate differences in employee needs based on age, marital status, partner’s benefit status, and number and age of dependents.

Benefits in general can be a motivator for a person to go to work, and for a person to choose one organization over another. But are flexible benefits more motivating than traditional plans? It’s difficult to tell. Some organizations that have moved to flexible plans report increased employee retention, job satisfaction, and productivity. However, flexible benefits may not substitute for higher salaries when it comes to motivation.84 Furthermore, as more organizations worldwide adopt flexible benefits, the individual motivation they produce will likely decrease (the plans will be seen as a standard work provision). The downsides of flexible benefit plans may be obvious: They may be more costly to manage, and identifying the motivational impact of different provisions is challenging.

Given the intuitive motivational appeal of flexible benefits, however, it may be surprising that their usage is not yet global. In China, only a limited percentage of companies offer flexible plans,85 as is true for many other Asian countries.86 Almost all major corporations in the United States offer them, and a recent survey of 211 Canadian organizations found that 60 percent offer flexible benefits, up from 41 percent in 2005.87 A similar survey of firms in the United Kingdom found that nearly all major organizations were offering flexible benefits programs, with options ranging from supplemental medical insurance to holiday trading (with coworkers), discounted bus travel, and child care assistance.88