It’s easy to value your job purely on salary, but you could be missing out on thousands of pounds of extra value from perks at work, explains Hargreaves Lansdown's Sarah Coles.
When you apply for a job, the salary will likely be your main priority, aside from a brief glance at whether you’re lucky enough to get a Defined Benefit pension.
When a potential employer asks at the interview whether there are any other questions, it’s unlikely that someone will enquire about the bike-to-work scheme.
Yet a good benefits package can in some cases be worth more than 10% of your salary.
If you know how to make the most of it, you may be able to squeeze thousands of pounds of extra value from your perks.
The most common benefit
There are some benefits that are offered to the vast majority of employees, and since 2012, this includes pensions thanks to automatic enrolment.
If you’re aged 22 or over and you earn over the minimum threshold (£10,000 a year), you’ll be automatically enrolled into a workplace pension.
The minimum paid into these schemes is 8% of your salary with at least 3% of this paid by your employer, although some are more generous.
The good news is that the AE Extension Bill has received Royal Assent – which allows for automatic enrolment to start from the age of 18 and for contributions from the first pound of earnings.
It’s a real disappointment this still hasn’t been brought in, but in the interim, if you’re too young to be in the scheme automatically, you have the right to ask to be put into it.
Get a £3,000 pension boost
It’s worth looking into how much your employer actually pays, and whether they’ll match any extra contributions you make.
It can be difficult to sacrifice more of your salary for a more generous pension in the future, but if every penny you pay in is matched by free money from your employer, you could be better off in the long run.
If both you and your employer save an extra £100 each month, after tax relief Basic Rate, you can effectively engineer a £3,000 pension boost every year.
For Higher Rate taxpayers, the boost is even bigger at £4,000 a year.
It’s also worth exploring what happens to your pension when you die. If you die before emptying the pot, the money in the pension will be paid out to a beneficiary.
To ensure it is paid to the person you want to receive it (and that it’s paid quickly) you need to complete a ‘nomination of beneficiaries’ form. The same is necessary for life cover.
Want to know more about pensions? Read our handy in-depth guide
Employee assistance programmes
A far less well-known benefit is the employee assistance programme. But it’s one of the most widely available, offered to all staff by almost nine in ten businesses.
These were originally counselling helplines for employees to call for anonymous advice.
But this programme has evolved to include a large number of other perks, so if your workplace offers it, check exactly what’s included.
Some offer face-to-face counselling, legal advice, health screening, debt advice, and online resources to help with everything from moving to a new house to finding the right childcare provider.
You’re also more likely to be offered a selection of discounts and cashback, which are worth exploring.
This benefit is particularly valuable for major expenses such as holidays, utilities, electronics and grocery shopping. There are potentially hundreds of pounds of savings to be made every year.
There's also been the growth in 'Digital GPs', which are now offered to all staff by around half of employers. This works for the employer because it can mean people aren’t stuck at home on sick leave, waiting for a GP appointment.
In addition, income protection is offered to all staff by around half of employers, and to some staff by another quarter. This can be an incredibly valuable benefit, paid out if you’re too sick to work.
It’s worth checking the small print to see how much income you will receive in these circumstances, and how long for. If you’re worried about any gaps, it’s worth considering buying some personal cover.
What are flexible benefits?
Aside from these benefits for everyone, there are some perks reserved for the upper ranks of management.
And while there will still be perks for the top brass – possibly including bonuses and share incentive schemes – the line between “them and us” has become more blurred.
Employers are increasingly offering what they call flexible benefits. These schemes let you give up a portion of your salary in return for certain benefits with a wide range of things on offer.
Some flexible benefits have tax advantages. For example, bikes bought through bike-to-work schemes and pension contributions via salary sacrifice can be bought from your pay before Income Tax or National Insurance is paid.
This essentially means you can save between 28% and 42% on the cost of a new bike (47% for Additional Rate taxpayers) and spread the payments over several months.
Other flexible benefits save you from paying National Insurance but not Income Tax, which means a saving of up to 8%. These include computers and tablets bought through technology schemes, as well as gym memberships.
Other benefits have more complicated tax arrangements such as cars.
It usually means it’s cheaper to lease a low-emissions car through a workplace scheme than directly from the car company as this specific charge tends to be based on CO2 emissions.
Even if there’s no tax benefit for choosing a particular perk, there can be huge advantages in signing up through work.
So, for example, health insurance through work is often far cheaper than the equivalent cover if you bought it yourself, as is critical illness insurance and income protection.
Cover will often include pre-existing conditions, which are excluded from personal cover, and will be priced without reference to your own health history, meaning you could save hundreds of pounds a year.
The benefits of share schemes
Some companies will also offer share schemes. There are two kinds that tend to be available to all employees and they’re very different, so it’s worth understanding what’s on offer.
A Save As You Earn (SAYE) or Sharesave scheme has a savings account into which you put a fixed amount each month for either three or five years.
At the end of the period, you’ll have the opportunity to buy shares in the company at a price that was fixed at the beginning.
If the offer price is lower than the current price, you can buy the shares and sell them straightaway for gain without any risk.
Alternatively, you can buy and hold them. If the offer price is higher than the current price you have nothing to gain by buying them, so you can just take out all the money you paid in.
The other type of scheme is a Share Incentive Plan that lets you buy shares in your company from pre-tax pay (known as Partnership Shares).
Companies can also offer free shares, or up to two matching shares for each Partnership Share bought. You need to hold them for five years or you’ll pay some tax on them – the amount of tax will depend on how long you hold them for.
With both these schemes, if you hang onto the shares after the scheme ends and make a large gain, you may be subject to Capital Gains Tax, but you can get around this by rolling them into an ISA within 90 days.
Any shares you roll into an ISA will come out of the current year’s allowance.
Don’t rule out non-financial benefits
There are other benefits which don’t at first appear to have monetary value but can leave you much better off.
Flexible working is a prime example of this because in many cases, being able to leave early or come in later can make a big difference to the childcare you need.
Likewise, the ability to work from home on some occasions can help you balance work and home life and cut the cost of your commute as an added bonus.
By understanding and using your benefits package to its full potential, you may be able to get thousands of pounds of value from it, find a better work/life balance, build a better pension, and possibly start investing.
And when work becomes more rewarding, Monday mornings could be just that little bit less painful.
Flexible working: Could you benefit from a change in office hours?