Salary Tips; 6 reasons why we should focus on benefits

This blog is all about salary tips. In all my years working in IT Recruitment. I am always asked the same questions around salary. Is there a package? It’s become very common within the permanent hiring space. IT jobs are perhaps at the top of the benefits ladder. The likes of Google & Meta have brought new meaning to the word “benefits”. In this blog we explore benefits and offer 6 reasons why we should sacrifice salary for better benefits. Salary tips are really important. Know your worth before going into the offer stage of a job process.

A growing trend I am starting to see is having a tailored benefits program for each employee, the least number of benefits you avail off the high your salary and vice versa.  The concept is simply to try offer the best of both worlds to everyone.

Below is a small guide,

Firstly, what is a Salary Sacrifice?

A salary sacrifice scheme is exactly as it sounds as briefly explained above. It is an agreement between employer and employee; the employee agrees to give up a portion of their salary each month to access some more benefits. Benefit and Kind taxation has to be considered but sacrificing part of your pay each month can be a sound financial decision, despite initially being met with scepticism. Salary sacrifice options can vary and can be a lot of work for Human Resources as these benefits have to be sourced and paid for by the business.

How would it likely Work?

An employee is provided with a non-cash benefit as a replacement for and agreed reduction in Salary. If an employee decides to enter a salary sacrifice scheme, they will pay less income tax but will have to consider benefit and kind. There is also savings from an employment tax perspective with less employer PRSI. Picture a list of 10 benefit items with an associated cost beside each.

For Example:

The business can mix and match the benefits and allow the employee each year to add to it or remove what they don’t want. There is a figure associated with each, its totted up and removed from the agreed salary. So where someone doesn’t want any benefits they get a higher salary, and everyone wins.

Factors to Consider Before Taking a Salary Sacrifice

As mentioned above, agreeing to a salary sacrifice lowers an employee’s earnings, it would affect things like things like loan and mortgage applications. But again, if an employee is looking to buy a house, they might want to increase their salary as much as possible. So, adding those values will help with that, it can work both ways.  In addition. Therefore, it’s critical that the employer be transparent on how a salary sacrifice can impact other aspects of their working life; however, employees also need to do their due diligence when to comes to educating themselves.

Examples of Salary Sacrifice Schemes

The types of salary sacrifice schemes that employers could offer is sometimes self-serving on both sides and having that level of flexibility can only be a good thing. It is all about making it easier for an employee to do their job and get the rewards that best suits them. Bonus and Commissions should not be part of these type of schemes, but company cars for example are a popular salary sacrifice scheme; an employer who wants to offer this should look up the tax and risk implications to doing so. There are leasing companies that offer this type of service to businesses rather than buying a car. It’s also important that only certain employees are offered this type of benefit. Certain areas might also be tricky but very popular amongst young families would be things like Childcare vouchers, cycle to work schemes, parking spaces, additional pension contributions, or work-related training schemes could be more common salary sacrifice schemes.

Considerations

There will always be some teething issues with this type of new concept around employee benefits. For example, do you bring the likes of sick pay, extended parental and maternity cover into the program. Depending on the policies of the employer, salary sacrifices can also affect bonuses, pay rises and pension contributions. Finally, it is not a realistic option for those on low incomes either, as it could bring their salary below the national minimum wage.

In Conclusion

Salary sacrifice schemes are a new concept but tried and tested in eastern Europe, it’s becoming more aperient in the UK. There are plenty of companies currently doing this successfully. It can be incredibly useful both to employers and employees and allows the employee to understand the costs involved with such benefits. It would also allow a business to offer higher salaries. In most scenarios, it is a win-win. However, it is recommended that anyone looking to enter or implement one of these schemes, as the case may be, should do your research beforehand to work out whether it is a good option for them financially.

Elwood Roberts is a specialist Recruitment business catering to the IT sector in both Ireland and US. With over 20 years of Recruitment experience, you can see more about our products here. If you did enjoy this article please see more of our insights here.