DEFINITION of 'Benefit Allowance'

Money that a company or government agency provides to an employee for a specific purpose, such as transportation, healthcare costs or a flexible spending account. Benefit allowances administered to employees can be distributed through regular payroll.

BREAKING DOWN 'Benefit Allowance'

Employers can use a benefit allowance to give employees flexibility in creating a benefits package that best meets their needs. Rather than imposing a particular healthcare plan on all employees, for example, the employer could offer a base plan plus a benefit allowance. The employee could use the benefit allowance toward supplemental benefits like dental insurance or coverage for dependents. Employers could also allow their employees to put a benefit allowance toward life insurance, disability insurance, vision care or any number of other benefits. Employees thus receive customized benefits and employers can offer a competitive benefits package that will help them recruit and retain top talent.

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