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Sure. It's the same basic "per diem" idea that's been in use in business for aeons to give employees reasonable compensation for expenses without bogging down accounting with thousands of receipts for $2.99.

That's the simplest, most effective option. And probably the cheapest too.

Very common in WFH companies, too.

And I think if they do it right they can have it avoid some tax, also. But I’m not an expert in that area.

Did that flat-rate payment come out of the pool of money for annual raises? (Probably no way to know.)

I'm guessing the desire is for it to come out of the company's profits, so investors pay.

Is there a free lunch to be had?

Over a long enough time period, all employee costs come out of the employee costs bucket.

My company does the same, they said it came from reduced office costs (no more catered lunch, less cleaning, now smaller offices)