How to get the most out of your work’s perks
Published 2 March 2016 by Kyri Levendi
With pay not expected to rise much this year, we’re taking a look at how you can get the most out of your work’s perks.
According to predictions from The Resolution Foundation, pay rises could slow to less than 1% by the end of this year, from their current level of around 2.5%. With this in mind, it could be time to look at utilising the benefits that come with your workplace, so that you’re getting as much out of it as possible.
Depending on your workplace, you could have a number of different employee benefits available to you. From pensions to gym memberships, we’re going to take you through some of the benefits that you could take advantage of.
One of the most significant benefits offered by employers is a pension. With a workplace pension any contributions that you make will be topped up by your employer and tax relief from the Government.
The Government has now widened the net so that everyone who earns more than £10,000 a year and is aged over 22 must be automatically enrolled into a pension scheme by 2018. Most of the big employers should have now completed this process and smaller businesses should be in the process of adopting this as well.
If you’ve received no correspondence from your employer regarding a workplace pension, ask them for more information.
Your employer may provide free cover that offers similar protection to life insurance known as ‘death in service’ benefit, which will provide a tax-free lump sum if an employee dies while employed by the firm. The cause of death does not have to be work-related, but you must still be on the payroll when you die.
These policies can be linked to a company pension, and in this circumstance you would have to be an active member of the pension scheme at the time of your death. The payout offered can vary depending on the scheme with some companies offering two times the employee’s salary on death, while others pay more at four times this.
It’s worth remembering though that death-in-service benefit is not necessarily a substitute to life insurance. Most people will take out life insurance for up to 10 times their annual salary, which is way above the maximum payout for death-in-service. This means you still might want to consider some sort of life insurance cover if you have financial obligations that could remain even after you die, such as a mortgage.
A salary sacrifice scheme is something that many organisations now offer. The idea behind this is that you give up part of your salary and receive non-cash benefits such as increased pension contributions or childcare vouchers.
As a result of your overall pay decreasing, you pay less tax and National Insurance – your employer won’t have to pay National Insurance contributions on the part that you sacrifice either. By exchanging your annual salary, you could take advantage of such perks as childcare vouchers, cycle-to-work schemes, company cars, mobile phones and gym memberships.
If you’re being offered this by an employer then there are a few things you should think about before accepting. Firstly, reducing your salary could impact your maternity pay or mortgage applications. This may also affect your State Pension or benefits such as Jobseeker’s Allowance and Employment and Support Allowance, as they’re contribution based. On the other hand, you may be able to claim more tax credits as a result.
If you decide to take advantage of the childcare vouchers offered to you by your employer, the amount that you can claim will depend on the rate of tax that you pay. The majority of people will receive help of up to £243 a month, with higher rate taxpayers being able to collect vouchers worth up to £124 a month.
When using childcare vouchers you can still choose your own childcare provider or nursery under certain requirements: they must be state registered or Ofsted approved. However, bear in mind that accepting childcare vouchers from your employer may affect your tax credits. If you’re currently receiving tax credits to help with childcare costs, you might decide it’s better for you to stay away from salary sacrifice. This is because you will only be able to claim tax credits for the childcare that you pay with money, not vouchers.