Negotiating salary and benefits

poeticjustice

Hi,

I'm applying for a new job. I've been offered 85k per annum for a different job and I'm looking to get the other job to match or beat this offer as this is the role I'd prefer. They have indicated they are willing to match this.

I'm trying to find the most efficient way to get the deal packaged, through salary alone or through a lower salary but with benefits. I've enquired about the possibility of getting a company contributed pension to take advantage of tax relief and they have been trying to sell me on the idea of a profit share scheme. (At the moment the profit share could be worth approx. 10k per year (10%) and this is more unlikely to decrease anytime soon).

Am I correct in thinking that taking the 85k straight as salary doesn't seem like the best option due to the amount of tax I will be paying? Would I be better off asking for say 65-70k plus 10% contributory pension plus the profit share? Or is there a better way to bundle this package?

Thanks for your help.

jonnybravo

A couple of things. In my mind a higher gross is better than a lower gross plus bonus / profit share. However I think a pension contribution is important. I'd probably take a slightly less gross salary for a job with a pension contribution.

jonnybravo

Also a higher gross wage would be important if you are applying for a mortgage as most lenders won't take in discretionary payments like bonuses.

poeticjustice

poeticjustice wrote: »

.............

Am I correct in thinking that taking the 85k straight as salary doesn't seem like the best option due to the amount of tax I will be paying? Would I be better off asking for say 65-70k plus 10% contributory pension plus the profit share? Or is there a better way to bundle this package?

Thanks for your help.

You can take the €85k straight as salary and get PAYE tax relief on your own contributions to a pension.

I'd go that route as there's advantages to a larger salary (borrowing capability, redundancy payments, % based rises etc etc etc)

Johnny_Fontane

I would definitely be taking the highest base salary you can get. most benefits work off the base from a percentage perspective (bonus, pension etc). Base drives everything.

steamsey

I wouldn't let company pension contributions decrease the gross salary

witchgirl26

steamsey wrote: »

I wouldn't let company pension contributions decrease the gross salary

This. What kind of pension does the company offer. Mine will match personal contributions up to 4% of monthly salary (I can put in more but they don't go higher than 4%).

I'd aim for the higher gross salary and not use pension contributions to decrease this. Even maybe try to get the profit share as a bit additional (getting the 10% on the higher gross might not happen) but be aware that there can be conditions attached to this that are not as beneficial as it first looks. I had a share scheme in a previous company but I realistically had very little control over it and it all depends on how the company performs. I would have said my old company would still be making massive profits 8 years after I started but the reality is a series of not great bosses has caused that to drop dramatically.

poeticjustice

Thanks everyone for the replies. Higher Salary seems to be the best way to go.

Yeah, I wasn’t overly keen on the profit share scheme. Would prefer the guaranteed salary.

Regarding pension, if I take the higher salary and put say 20% into a prsa, is that the equivalent of taking a lower salary with 10% contributed pension from the company and me contributing a further 10%? Are both tax free at the time of making the contribution? I wouldn’t be putting more than 20% into a pension at this time anyway.

I currently have a mortgage so probably won’t need another anytime soon. Would like to over pay on that soon enough too

poeticjustice

poeticjustice wrote: »

..........

Regarding pension, if I take the higher salary and put say 20% into a prsa, is that the equivalent of taking a lower salary with 10% contributed pension from the company and me contributing a further 10%?
....

OK so you get €85k with no pension. Throw €17k into a pension and you have €68k left in wages.

To have that €68k in wages and €17k to pension with employer contributions you'd need a salary of €76.5k ........ and the employer would need to make an 11.1% pension contribution which you'd need to match (2 x €8.5k = €17k)
You'd then still have your €68k after pension contribs.

However, there's a 22.2% pension contribution which can't be done unless you are 40+ years old.

poeticjustice wrote: »

..........Are both tax free at the time of making the contribution?................

PAYE tax relief applied to both iirc.

What kind of jobs pay €85k salaries with no pension as part of the package? That's rhetorical enough btw :pac:

Tar.Aldarion

^^^ Employer matching doesn't count towards your age limit for pensions or so I was told, is that wrong?


EDIT: Looked up the advice again and an occupational pension treated different to a PRSA so employer contributions for an occupational pension don't count towards the age limit while they do for a PRSA, something else to take note of.

Tar.Aldarion

Tar.Aldarion wrote: »

^^^ Employer matching doesn't count towards your age limit for pensions or so I was told, is that wrong?

Wrong........https://www.revenue.ie/en/jobs-and-pensions/pensions/tax-relief-for-pension-contributions.aspx

Age-related percentage limit for tax relief on pension contributions
Age Percentage limit

Under 30 15%

30-39 20%

40-49 25%

50-54 30%

55-59 35%

60 or over 40%

For example, an employee who is aged 42 and earns €40,000 can get tax relief on annual pension contributions up to €10,000.

Total earnings limit
The maximum amount of earnings taken into account for calculating tax relief is €115,000 per year.

PRSAs
Employer PRSA contributions are:

deemed for tax relief purposes to be made by the employee
added to the employee's actual contributions to determine if the above limits are reached
treated as a taxable employer benefit received by the employee.

Tar.Aldarion

Tar.Aldarion wrote: »

..........


EDIT: Looked up the advice again and an occupational pension treated different to a PRSA so employer contributions for an occupational pension don't count towards the age limit while they do for a PRSA, something else to take note of.

I dunno about that, for employees it's the same.
For executives with director's pensions there's an Ordinary Annual Contribution amount allowed that is calculated actuarially (is that a word, lol) that is in excess of the employee limits.

Tar.Aldarion

Augeo wrote: »

Wrong........https://www.revenue.ie/en/jobs-and-pensions/pensions/tax-relief-for-pension-contributions.aspx

Age-related percentage limit for tax relief on pension contributions
Age Percentage limit

Under 30 15%

30-39 20%

40-49 25%

50-54 30%

55-59 35%

60 or over 40%

For example, an employee who is aged 42 and earns €40,000 can get tax relief on annual pension contributions up to €10,000.

Total earnings limit
The maximum amount of earnings taken into account for calculating tax relief is €115,000 per year.

PRSAs
Employer PRSA contributions are:

deemed for tax relief purposes to be made by the employee
added to the employee's actual contributions to determine if the above limits are reached
treated as a taxable employer benefit received by the employee.

I edited above to state the difference between PRSA and occupational pension at the same time you posted.

Augeo wrote: »

I dunno about that, for employees it's the same.
For executives with director's pensions there's an Ordinary Annual Contribution amount allowed that is calculated actuarially (is that a word, lol) that is in excess of the employee limits.

It's not the same if you are maxing out your pension. Say your limit is 20%, with an occupational pension you can put that all in yourself and anything the employer matches is added in on top of, effectively breaking the limit without incurring any BIK charges (you'd have BIK charges with a PRSA though).

Tar.Aldarion

I'm just commenting that the 22% contribution you mentioned is fine with an occupational pension, not with a PRSA so the OP should note that if comparing them.

poeticjustice

Thanks again folks.

I’m happy enough leaving contributions to 20% at the moment anyway for the moment as I’m trying to pay off my mortgage a bit quicker too so need the cash.

So to sum up, not a huge difference between getting the higher 85k salary and contributing 20% myself to a prsa; and getting a lower salary of around 77000 with say 10% employer contribution and me matching it ?

Thanks again

poeticjustice

poeticjustice wrote: »

..........

So to sum up, not a huge difference between getting the higher 85k salary and contributing 20% myself to a prsa; and getting a lower salary of around 77000 with say 10% employer contribution and me matching it ?

Thanks again

Indeed.....

Augeo wrote: »

OK so you get €85k with no pension. Throw €17k into a pension and you have €68k left in wages.

To have that €68k in wages and €17k to pension with employer contributions you'd need a salary of €76.5k ..................

I'd go the higher salary route, it puts you in a better position for future % based increments and also you can propose that they contribute to your pension in the future too

poeticjustice

I'd go the higher salary route, it puts you in a better position for future % based increments and also you can propose that they contribute to your pension in the future too [/quote]

You’re a gent!! thanks