From the little perks, such as free tea and coffee, to a workplace pension; do you know what employee benefits your company offers?
Perks of the job
Have you spent the last six months paying full price for a gym when it turns out you get great corporate discount on the one right by your office? Annoying, isn’t it? There are a staggering number of people in employment that have very little awareness of what benefits are available to them and how to take full advantage.
Knowing what is on offer is not only important for those in work, it can be just as valuable for those looking for work
Knowing what is on offer is not only important for those in work, it can be just as valuable for those looking for work. For example, if you are looking for a job, don’t just dismiss the one with the lower salary. If you add in the value of the pension and other benefits you may be surprised to discover that a lower paying job with great benefits can put you financially ahead when compared to a higher paying job with no perks (winner!).
Most of us are probably already aware whether or not our employer offers us a pension, even so, there are some big changes ahead with auto-enrolment. Start familiarising yourself now with the situation and how this will affect you.
Aside from a pension though, have you considered the other areas of your benefits package? To fully appreciate your benefits, you need to understand them first – that is where we come in! To help you get the most out of your employment (and why not, you might be there until you’re 65!) we have outlined some of the most important benefits that you are likely to come across.
Workplace pensions (also referred to as ‘occupational’, ‘works’, ‘company’ or ‘work-based’ pensions) are a great way to save for retirement. Arranged by your employer, (which means all the hard work is already done) they make contributions to your pension through the scheme (free money!). Sometimes you are also asked to make contributions whereby a fixed percentage of your salary will be automatically deducted each month before you’re paid.
What happens when you retire depends on the type of pension scheme you are a member of. For most people, whatever you have saved up in your pension pot will be used to buy an annuity so the exact amount will depend on how much you have, and the rules and annuity rates at the time. For the lucky few who are or were members of a final salary pension scheme, the amount of pension is guaranteed by the employer and is not dependent on the amount contributed.
You can also usually take out a part of your pension as a tax-free lump sum when you retire. Which means, yep you guessed it; the rest of your workplace pension is taxed. This works similarly to your salary and is deducted via the PAYE system, before it reaches you.
It is important to be aware that there are not only different types of workplace pensions (like money purchase or final salary), there are now several other pension options available such as personal, or stakeholder pensions, both of which can be a good option if your employer doesn’t offer the more traditional pension scheme. So make sure you do your research and find out what is available to you!
Finally the state itself offers you a pension, as long as you have the appropriate NI contributions (usually paid whilst you are working). The current State Pension you can get is £115.95 a week (per person), and anything you get from your workplace pension will be in addition to that – meaning a much more comfortable retirement and money to continue doing the things you enjoy!
Automatic Enrolment into Workplace Pensions
There has been a big change recently; one that is likely to affect everyone in, or looking for work. In an effort to help more people save for their retirement, the government has introduced a new law whereby every employer must automatically enrol workers into a workplace pension scheme if they are:
- Aged between 22 and state pension age.
- Earn more than £10,000 a year.
- Work in the UK.
- Not already a member of a suitable pension scheme.
Automatic enrolment started being phased in from October 2012, but not everyone will join it right away. Depending on the size of your company you might not be enrolled until 2018 – large employers are starting first followed by medium and smaller ones last.
Your employer should let you know the exact date by letter, but if you are unsure as to whether they currently offer a workplace pension, or when they are likely to join the auto-enrolment, it is definitely worth asking either your HR representative or line manager.
It is important to be aware that whilst you will be automatically enrolled in the scheme; you do have the choice to opt out – just ask the person that runs your scheme for an opt-out form. However, make sure you have really thought through the consequences of doing this, and in particular that you don’t mind losing out on any contributions from your employer or the government (in the form of a tax-relief).
How much will I have to pay?
To start with, you will need to pay 1% of your pre-tax salary, each month. Your employer will then also contribute an equal amount. However, the amount both you and your employer are paying will gradually increase, so that 5% of your pre-tax earnings are paid into your pension by October 2018, with a further 3% paid by your employer.
However, these minimum figures don’t apply to all of your salary, but on what you earn (including overtime and bonuses) over a minimum amount (£5,824 in the tax year 2015-16) up to a maximum limit (£42,385). So for example, for someone earning £25,000 a year, the contribution would be based on £19,176 (the difference between £5,668 and £25,000).
Wider employee benefits
It is always worth doing your research and finding out what is available
Employee benefits are just that, beneficial; to you and often your family. So, if you are fortunate enough to work in a company that offers some great benefits for free, you would be mad not to take them. Some of the most common benefits include: Group insurance (dental, health, life), childcare, retirement benefits (pension), share schemes, sick leave, funding of education and disability income protection. In the UK our employee benefits are usually described in three main ways:
- Core Benefits – ones that all staff members get to enjoy, such as pension (see above), life insurance, income protection and holiday allowance.
- Flexible Benefits – an increasingly popular arrangement, where employees are given an allowance to spend on their benefits from a pre-defined list of options, a bit like a menu! This allows you to tailor your benefits for your specific needs i.e. if you are single with no kids, you probably don’t want the Partner Critical Illness Cover.
- Voluntary Benefits – a collection of benefits that you can choose to opt-in and pay for personally (this would usually come out of your salary) – often includes things such as the Government’s cycle to work scheme, childcare vouchers, gym membership, pension contributions etc.
Employee benefits can often be pretty poorly communicated and every company will differ in what they offer and how they offer them – so it is always worth taking the initiative and finding out for yourself exactly what you are entitled to. The best people to ask are often your HR representative, or your line manager.
There are more and more companies nowadays that are going above and beyond the regular benefits and offering exciting and on-brand rewards to ensure a positive and productive working culture. This could be anything from free coffee and flexible hours to in-house yoga and discounts at your favourite shops and restaurants. Now do you see why it is always worth doing your research and finding out what is available?!