If your salary isn't up there with the City workers, make the most of what you have -- and that means grabbing every bit of free dosh your employer has to offer. Here's how...
It's the end of the month and for most of us that means pay day. And if, like many, you constantly lament the meanness of your pay packet, you'd probably snap up the chance to increase your salary. But did you realise there are ways to boost your pay in addition to asking for a raise?
A number of companies offer benefits at reduced cost or even free, and taking up the ones relevant to you could save you (and your family) a fair amount of cash.
1. Pension
This is an obvious one, but one so many people fail to take advantage of. Most companies offer some form of pension, be it the all too rare final salary (defined benefit) scheme, or the more common defined contribution type. But did you realise that many employers offering the latter scheme will contribute money to your pension on your behalf?
Say Sarah's company offers a defined contribution scheme to which it will match employees' contributions up to 5% of their salaries. If Sarah earns £25k and pays 5% into her pension, her company will contribute the same, which, when you take into account basic rate tax relief means that her pension pot will be boosted by £2,500. By failing to pay into her pension Sarah would therefore effectively be turning down up to £1,250 of free money from her boss!
What's more, higher rate taxpayers (those earning above around £38,400) can gain even more, as they can claim another 18% tax relief back through their tax return.
Worth/year: Typically 5% of your salary
2. Childcare Vouchers
Anyone with children will know just how expensive childcare can be. And with many nurseries and childminders having increased their fees by more than a cost of living percentage this year (4% not being uncommon) every penny counts. So if your employer offers the Government's Childcare vouchers, you should really snap them up.
Essentially, the scheme allows you to sacrifice some of your gross salary in return for vouchers that can be used to pay for childcare. Currently, the first £55 worth of vouchers can be bought per week (£243/month) free of income tax and national insurance.
A basic rate taxpayer could therefore save up to £962/year, and a higher rate taxpayer up to £1,196/year -- and as both parents can sign up, two higher rate taxpayers could save nearly £2,400 in childcare costs, per year!
It's therefore well worth finding out if your company offers the scheme as part of its benefits package. What's more, as it typically works out to be cost neutral to employers (they also save on the national insurance contributions) if your company doesn't offer the vouchers, why not ask if it could sign up?
However, do be aware that signing up for this salary sacrifice could affect your entitlement to Working Tax Credit -- so do check with the Inland Revenue first.
Worth/year: Basic Rate taxpayer <£962
Higher rate taxpayer < £1,196
3. Insurance
If your employer offers insurance as part of its benefits package, it can often be worth signing up. As companies tend to negotiate deals for large numbers of people, the premiums offered will often be much lower than you'll be able to find elsewhere, and some will even offer cover for your family, too. Even better, they could offer the cover for free.
Life Insurance/Death in service cover
This may not seem like a very interesting perk, but it is one that can save you a significant amount of money, if you have dependents. Many companies offer their employees free life insurance, typically worth around three or four times your annual salary. Someone earning £25k could therefore be entitled to free cover worth up to £100k. And while it may not be enough to fully provide the amount of cover you need, it could certainly help. Plus, as life cover premiums tend to increase the older we get, this could be especially valuable to more senior employees.
Critical Illness cover
Another type of insurance often offered by employers is critical illness cover. This pays out a tax free lump sum in the event of you suffering from a serious illness, or if you have to undergo certain types of surgery. Premiums are typically more expensive than those for life insurance, and depend upon your age, sex and health.
However, many companies offer critical illness cover as part of their benefits package for far lower prices and in some cases, for free. What's more, some also allow you to include your partner and children for far less than you could pay elsewhere.
Income protection insurance
A number of companies offer income protection insurance for free, or at a reduced cost. Unlike critical illness, this will pay out if you are unable to work and premiums can be quite expensive, so you could save a fair bit compared to taking out a policy yourself. However, you do need to check the details carefully as not all policies are the same, to ensure it will pay out when you want it to.
Medical Health Insurance
Medical health insurance is often available as a taxable benefit which can save a fortune, when compared to the cost of taking out the cover yourself. And if you and your partner are both entitled to this cover, you can save even more by taking it out for both partners through the partner who is in the lower income tax bracket.
4. Other Perks
Finally, your company may also offer you the chance to participate in other schemes such as:
Sharesave
Essentially, the Sharesave scheme allows employees to save between £5 and £250 monthly for three or five years. When this time is up you will receive a tax-free bonus, and be given the choice to either take your cash and run, or buy shares in your company with it -- and depending on performance this means that you can potentially make some serious money, especially if your company offers a discount on the buying price, too.
Share Incentive Plan (SIP)
This is another share-based scheme, but instead of saving your monthly contribution for three or five years and then buying shares, you purchase shares in your company out of your gross salary (subject to a limit of £125 per month). If your SIP is a "Buy one get one free" scheme, your company will give you a matching share for each one bought, up to a set maximum. You're then locked into the scheme for a set period of three years usually (or you'll lose the free shares) after which time you can sell all of your shares, free of tax and NI.
And finally, those working for larger companies tend to be offered more flexible packages of benefits -- so take some time to check what you're signed up for and make sure they're relevant!
Hopefully this will inspire you to check with HR department to find out what you're entitled to. And if you're one of the organised few that have their benefits package organised, why not boost that pay packet the old fashioned way, by asking for a raise!