Does the Cafeteria Plan Pay Off? An Empirical Research Study

Introduction At the fourth EFPS/EAPM International Conference on Work, Performance, and Pay (The Hague, 1977) the first author presented a paper on the general characteristics of the cafeteria plan in which, among other things, the need was stressed to gain more experience with “experimental applications” of the plan. As may be known, the cafeteria plan implies that each employee in an organisation may make choices each year among alternative options as to how he or she would like to receive a predetermined part of his or her income. A wide variety of benefits are possible, at least in principle; for instance, a shorter working week, more vacation, educational leave, cash pay, additional health insurance and so forth. The options may be presented to the employee in a variety of ways, such as: a list of alternatives on the basis of which he designs his own package; a series of alternative packages out of which he may select one; and combinations of these. The spendable amount per employee per year is usually based upon the (“actual” or “nominal”) increase in his salary , including maturity changes (like experience and age), performance assessment and so forth. But another method, perhaps more appropriate in the case of a struggling economy, would be to allow an employee to re‐allocate a given part of his current income in terms of his most urgent needs and preferences. Still another basis would be provided by the difference between current and future income in the case of promotion.