Seven hidden perks in your pay packet
Feature
by Nathalie Bonney
More than half of employees say their company has either frozen or cut pay over the past six months, according to the Chartered Institute of Personnel and Development. But while there may be little chance of getting a pay rise this year, there are employee benefits that can boost your salary.
Pensions
If you're not already paying into your company pension, do it now. Any money put towards your pension will receive tax-free treatment (contributions can't exceed your annual earnings or the annual allowance of £255,000).
That means that for every pound put in, you'd get £1.20 or £1.40 as a higher-rate taxpayer.
On top of your contributions, employers will also make monthly payments that either match yours or may even be more. In April 2011, new rules came in to give tax relief if your income was over £130,000.
Get more money from your pension
Salary sacrifice
This is where your employer reduces your salary in return for specific benefits, such as pension contributions, gym membership or private medical insurance. The advantage of moving this money over to cover these types of benefits is that you'll pay less tax on your salary.
Basic-rate taxpayers will benefit from having access to extras they otherwise couldn't afford, while higher-rate taxpayers can cut a chunk off their income tax bill.
For example, if someone earning £112,950 uses salary sacrifice to reduce their salary to £100,000, putting the additional £12,950 into their pension would reduce their tax bill by £7,750, according to Standard Life.
Wellbeing
Larger companies will benefit from more attractive discounts with the big gyms like LA Fitness or Virgin Active because the gyms know they're onto a good corporate deal. Smaller-sized companies may have less negotiating power but you may still be able to get 10% off gym membership.
The benefits you'll get from company medical insurance schemes work in much the same way. Some offer free health checks, which are worth up to £500, so take advantage of these.
Company cars
These tend to be the preserve of senior management and employees considered 'essential drivers'. However, salary sacrifice is an easy way for employers to open up the offer to all employees. Choosing a more fuel-efficient vehicle will also reduce the tax you pay.
Agreements typically last three to four years, with the option of buying the vehicle at the end. Monthly deductions can be as little as £150, rising to £400 to 500 for a top-range vehicle.
Also consider the cycle-to-work scheme (cyclescheme.co.uk and bikehub.co.uk) - this is a salary sacrifice scheme whereby your employer buys you a bike and you repay it out of your gross monthly salary, so you save on tax too.
Cut driving costs by getting a company car
Childcare vouchers
Using a childcare voucher scheme will save higher-rate taxpayers up to £622, while basic-rate taxpayers save £933 - this amount can then be doubled if both parents take vouchers (families can therefore claim up to £486 per month in childcare vouchers free of tax and NI).
Holiday buyback
Employers tend to allow employees to carry over a number of unused holiday days to the following year's annual leave.
However, if you're unable to take all of your holiday because of the demands of work and would therefore have to carry over a lot of extra days, it's worth seeing if your employer will buy these back.
Taking a more long-term view, ask your employer if you could start saving a small amount of your salary each month towards buying extra days that would eventually allow you to have a sabbatical of 10 to 12 weeks.
Discounts
Depending on what your employer does, you may be able to take advantage of discounts like money off electronic goods or insurance products. It might allow you to either buy these on a discounted basis and/or through salary sacrifice, which means you won't be charged tax.
I work for Hertfordshire County Council who have opted out of JNC negotiating with Unison and have told all employees (regardless of grade) that not only will we not have a cost of living pay rise this year or next, but they will stop paying our Outer London Fringe Allowance too. A colleague is now moving to Stafford, where she will be paid several thousand a year more for doing the same job and will pay half the rent for a property twice the size !! I think that somewhere along the way, the north/south divide has shifted !!
I agree with Mike Moore - small company. We get medical insurance but, thanks to the Labour governmenb, now get taxed on it!
Mike, I work for a small company (<20) and they offer a pension and childcare vouchers. The latter are very easy to set up and the former is a great advantage.
Who ever wrote this article isn't in touch with the real world. Very few companies are able offer the perks and benefits mentioned here. They also lose credibility by quoting salaries of £112,950 which are removed from the average salaries that people in the UK earn.
how does a car scheme with salary sacrifice work without incurring a taxable benefit?
I know nobody like paying tax, but part of the reason the country is in such a mess is that everyone wants more benefits but nobody wants to pay for it. The reality of the situation is that we actually need to pay more tax :(
Company I work for now gives me a " free" pension in return for giving up the percentage that I would have had to contribute - I save the national insurance in it and as its not been paid then the company saves its contribution.
It of MORE benefit to the lower paid than the higher paid as NI contribution is at a higher rate up to the point where the 40% tax rate kicks in.
Approaching retirement I suggested that my employer pay all my last three months salary into the company pension fund. They jumped at it as it meant that they didn't have to pay employers' NI on it. I ended up in a lower tax bracket for that tax year and the only cost was using some of my savings to live on for that three months. Next tax year I went on pension and got 25% tax free which neatly paid back my savings.
Everybody won except the taxman!
As B.F.Jerome says "The rich get richer, and the poor get poorer. It never changes, it just gets worse."
I know of NOBODY who would benefit from any of these "suggestions"; and if I went to my payroll dept. I'd be laughed out of the office for suggesting them.
I don't want or need so called perks like gym membership, child care vouchers or medical insurance schemes. All I want is a wage that lets me live a reasonable life style without relying on overtime, (a practice I NEVER subscribe to, but have worked with people who did).
Nowadays, most companies DO NOT care for their workforce and use perks, which cost them little or nothing as carrots because there will ALWAYS be someone who thinks that a few quid off a gym equates with a living wage. And if they complain, well, we don't reconize the union and they've had their teeth pulled anyway, and you can be replaced easily for someone new, on a lower pay rate due to the unemployment levels, (which is what my company seem to want). Or they can just re-locate, and make everyone redundant. Then re-employ elsewhere, again at a lower payscale.
Anyway, keep your benefits and give everyone a wage they can live on and NOT just exist.
Before I close, about 30 years ago I read about an engineering company who only paid their staff about 3 or 4 quid a week, but this was paid in gold sovereigns! Which they would then change at the bank.
Now that would be a benefit!
I only work 2 days (15 hours) a week for Eon on a normal wage. They are an excellent company to work for and offer all the savings described above.
I buy an extra weeks holiday, every year. My brother works for Eon too and he bought some hotel breaks and days out vouchers.
Not everybody has to be on a top notch wage to get these perks, just a good, rewarding company that respect their employees.
Actually paying large sums into your pension up to 2 years before, or after, receiving a lump sum from your pension is classed by HMRC as 'recycling' and is illegal. You could be hit for a large tax bill by them. So I'd be carefull who you're telling!!!
I work as a support worker for a large ( ish ) company. Ive been there nearly 2 years and have had no pay rise and as im told by my collegues have had no pay rise for at least 2 year prior !!... I have to have qualifications and constant training for my job, yet i earn less than a supermarket shelf stacker ( no offence to shelf stackers).Cant afford to pay in a pension and since the working tax credits have been dramatically cut am lucky if i last the month out.... no help with anything ,Since the minimum wage went up im now only 30p more per hour !!. I would have to work 7 years to earn that type of wage,,,why are all the perks for the high earners??, what about us low earners ????,,
You have not not mentioned the 'cycle to work scheme'. This is also a perk to an employee. Say a bike costs 300. The employer recovers VAT of 50. You then pay 250 to your employer over say 12 months. However this is a pre-tax deduction so you actually pay 170 after tax and NI. If you are on tax credits as well, than another 41% of 250 is also receivable. Look into this as a 300 bike can cost as little as £68.
Please have a look at GemelliEmployeeBenefits for a full range of salary sacrifice benefits - They also work with smaller companies to offer these schemes and have no minimum numbers. It is a great way to support employees especially where companies are struggling to give pay rises.
Companies also save on Employers NIC.
I should bloody well think so. Use the NHS.
i dont get this. ive just received this as an email today 27th Dec 2011 yet there are comments going back to May?
Also i have to agree with several of the commentators. this all makes no difference to me on the wages i earn ;-((
I checked out the discounted purchase of items through ones employer about 6 months ago after seeing this same article. Our accountants finally decided that it was illegal to attempt to purchase goods via this route in order to save your personal tax. If your employer did allow you to do it, the red tape is significant and they would have to send that information to the Inland Revenue who would then tax you for it. Overall it would cost you/your employer more.
This advice should be removed from the Moneywise suggestion list.