When you’re applying for jobs, you’ll often see salaries advertised as a “package”. It’s fairly obvious that this means that you’ll be getting a basic salary plus perhaps extras such as pension, company car, private health cover or other benefits, but how do you put a value on these extras and work out just how much they are worth to you?
This is the big one, and a great pension scheme can be extremely valuable to an employee. The gold standard in pension provision is the final salary scheme, where your pension payments are calculated depending on whatever your salary is when you retire. As most people earn more towards the end of their career, this can be attractive. There aren’t many employers still offering final salary pensions, but the quality of pension provision varies hugely. Investigate what sort of provision the company makes, what level of employer contributions they offer, and find out whether you have the ability to make more contributions to your pension if you want. Taking professional advice on pensions is advisable as they are probably the biggest investment you’ll ever make.
Over recent years it’s become less common for companies to offer their employees cars, especially if their role doesn’t require them to be mobile. Tax rules have changed, so many employers have started to offer an additional allowance on salary towards a car which is taxed in the usual way. If for example your employer offers £500 a month towards a car, this equates to an extra £6000 per year on your salary, which you can choose to spend as you please. If you choose to have a car provided, you will be taxed on this benefit depending on the type of car and how much CO2 it produces. Do your sums carefully to work out whether this benefit is worth taking or not.
Employers can make a job package more attractive by offering increased holiday allowance to their workers. Think of it in this way; offering five days more holiday than the legal minimum reduces by a week the time you’re working, and increases your hourly rate. You’re not taxed on how many holidays you’re entitled to, so this can be a valuable benefit which costs you no additional tax.
Private Medical Insurance
Sometimes employers will offer private medical care to their employees and their families, usually through a big insurer such as BUPA or AXA. You will be taxed on this benefit too, and not every health problem will be covered. However, if you need to make a claim on your private medical insurance you will be seen more quickly in many cases than using the NHS, and you may be able to access additional services such as physiotherapy. Your employer’s HR department should be able to give you details of what’s covered.
Many employers have signed up to a government backed childcare voucher scheme, which lets parents pay for their nursery or childminder direct from their salary. Childcare Vouchers are taken from gross salary rather than net, and this type of salary sacrifice means that you pay less tax and is well worth considering.