Employee benefits you may be entitled to

As the old adage goes, there's no such thing as a free lunch. But with disposable incomes squeezed ever tighter - recent figures from the Office for National Statistics show that the average income has fallen by £1,200 since 2007/8 in real terms - your employer could potentially be a huge source of untapped benefits.

Workplace pension

The first and most important benefit to sound out is a workplace pension. Many employers will offer workers a pension scheme to which you contribute monthly, and will often match your contributions. Research at the start of the year from Fidelity Worldwide Investment suggests that an employee could benefit to the tune of £10,000 in extra employer contributions over a decade if they start investing in a pension. Added to this, you receive tax relief on the contributions and it comes out of your gross income.

If your employer doesn't currently offer a scheme, the government-backed National Employment Savings Trust (Nest) came into effect in October 2012, and will eventually see all employees enrolled into a workplace pension scheme automatically. It will also set minimum contribution levels for employees. But it's only being rolled out to big firms at first, with smaller companies to be included in the scheme by 2017.

Additionally, employees can give up more of their wage each month via salary sacrifice - explained in more detail later on - in return for extra employer contributions to a pension fund, in order for both you and your boss to sidestep national insurance (NI).

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Share save schemes

Investing in your company's share save scheme is a great way to save money. There are two main types of scheme - the save as you earn (SAYE) and the share incentive plan (SIP), and both allow employees to buy shares at a discount to the rest of the market.

SAYE schemes are the more popular of the two, says John Collinson, head of employee share ownership at membership body ifs ProShare, with around 85% of companies in the FTSE 100 offering them compared to 75% for SIP schemes.

With the SAYE scheme, each month you can save between £5 and £250 into an account, ringfenced from your company so it also comes under the remit of the Financial Services Compensation Scheme should the firm default.

The share price is set at the day you start investing into the scheme, plus a 20% discount. Then, at the end of either three or five years - depending on which timeframe you choose - it can either be invested into the company's shares or returned to you if the share price has fallen.

The SIP scheme works slightly differently. Rather than waiting until the end of the three or five-year period to invest, the SIP is a share purchase plan, so shares are bought each month at the current market value. Up to £125 can be invested each month, and this is used to buy 'partnership' shares in the company. The money invested comes out of your salary before tax is deducted, so this is attractive for higher-rate taxpayers. "Employees feel more a part of the organisation as they are sharing in its success, and employers get a more motivated workforce," adds Collinson.


One of the most common free-of-charge workplace benefits is typically life insurance and income protection. An employer would usually provide life cover of between three to four times an employee's salary, alongside income protection, so that the salary is still paid if the employee is forced to take long periods off work.

Bear in mind that this benefit only applies while you are with your employer, and might not be sufficient for your needs, so it's unwise to rely on this alone.

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Private medical insurance - and the discounted gym membership that often comes with it - is also a popular workplace benefit. This can be a great perk, but even if your employer pays the bill it isn't entirely free as it will be taxed as a benefit in kind. This means you pay income tax on the cost of the premium.

In addition, there may be an excess payable, so the private medical insurance is usually only worth using if you need a course of medical treatment or an expensive one-off operation rather than something less expensive. You may also be able to buy additional policies such as critical illness at discounted rates.

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Other benefits include salary sacrifice benefits. These involve employees swapping a proportion of their salary in return for a non-cash benefit, usually exempt from tax or NI. Employers often save money too, as they don't pay the NI contributions usually payable on your salary, and could even pass on these savings to you.

Childcare vouchers

If you have children, childcare vouchers are the first salary sacrifice benefit to look into, particularly because more than one million families have suffered some hit to their child benefit since the beginning of the year. Childcare vouchers - which can be used to pay for after-school clubs, nannies, nurseries and childminders - are bought from gross income, so they are tax-efficient too. As an example, families on basic-rate tax can save up to £933 a year if one parent buys them, or £1,866 if they both do, according to voucher provider kiddivouchers.com.

There are other practical benefits available from the workplace that could shave money off your commuting costs. If you live close enough to work to commute by bike, then take advantage of the government-backed Cycle to Work scheme. Introduced in 1999, the scheme allows employers to loan the cost of a bike and cycle equipment as a tax-free benefit. In the same vein, many employers will offer a season ticket loan - a tax-free loan to buy a cheaper annual travel pass, which employees then pay back by sacrificing a proportion of their salary each month.

However, while tax-efficient, any salary sacrifice benefits could have a knock-on effect on other benefits or allowances. First, you will earn less each month, and this could affect any scheme that takes your salary into account, such as a mortgage application. It could also affect the amount of life cover you are entitled to from your employer, as well as the amount of maternity pay and statutory sick pay you are entitled to receive.

That said, some employers will use a 'reference salary'. This means that if you use lots of salary sacrifice benefits, the employer will use a notional salary before any deductions - to give to mortgage companies, for example.

There are other ways your employer could help you. "Even where an employer doesn't offer free benefits, there can still be significant advantages in using it to purchase certain goods or services rather than buying them directly yourself," says Patrick Connolly, certified financial planner at Chase de Vere. "Your employer can take advantage of their size and scale to negotiate discounts."

Lastly, it's always worth asking if there are any training courses available, which will be invaluable for your CV. So you might be able to get something for nothing, but it's also about deciding whether the benefits are right for you before you opt in.

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