Why your whole employment package is more important than just your base salary…

We all do it – we judge a role or even an entire business based on the salaries they pay. When is the last time you heard someone discussing / bragging about how extensive their employment package is? It’s natural, we look at the base salary to work out what income we will have to live on and how much money we are going to have, to spend. Also, times have changed; employment packages have changed and developed over time – they have become more extensive and more important as the struggle to attract the best talent has intensified.

So why is looking at your full package so important?

The quick and easy answer is that there is a lot of value in an employment package away from just the base salary. You could be earning ￡50K as a base salary, but when you look at the entire package you could be adding ￡10K of value on top of that. So, when you start looking at new opportunities you need to be looking for roles that offer a package valued at ￡60K as a minimum and not ￡50K.

It’s all good and well finding a new opportunity and deciding it’s the right one for you – the salary is an increase from your current but there isn’t much in the employment package. You crunch the numbers and figure out that although you are getting a 10% increase on your base salary; you are actually taking a cut once you take the value of the employment package into account. So, its not worth the move and you have to let them down / renegotiate.

Where does the value in an employment package come from?

Pension – Most employers must now offer a work place pension – in England it’s a minimum 8% (3% employer contributions / 5% employee contributions); in Scotland its also 8% but matched contributions of 4% from employee and employer. However, many employers offer many different pensions plans. Some may match contributions up to a certain level; some will contribute 1.25% for every 1% you contribute; others offer fixed contribution amounts. Why does it matter? Based on a ￡50K salary, if an employer is willing to contribute 6% into a pension scheme compared to 3% from someone else then you are potentially missing out on ￡1500.

Company Car / Car Allowance – There is a lot of variation in this again. Some employers may provide a vehicle for you, others will have a company car scheme you can opt into and get a car (you pay benefit in kind tax for this), others may have a program you can opt into which you pay for yourself but the rates are cheaper than you could get as an individual; finally, they may offer a cash amount. Some don’t offer anything at all. So again, depending on your current package, you could be missing out or gaining depending on what’s on offer elsewhere. If you get a ￡6K car allowance now but a new employer only offers a scheme which gives you a new car (and you don’t want one) then you lose ￡6K of value. If on the other hand you get nothing at the moment but a new employer offers a ￡6K allowance then you gain value.

Bonuses – Another overlooked / forgotten about part of a package. Some companies offer bonuses and others don’t. Those that do can do it in thousands of different ways – so its important to break it down again to see what value there is and how that compares. With bonuses, the first thing to remember is they are not guaranteed in 99% of cases. However, if you have worked somewhere for 4+ years and you have received a bonus every year averaging ￡3K then you can use that as your value amount. Also be aware of the rules around the bonus – is it based on company, team or personal performance etc.

Sponsored Training & Education – Another often-overlooked benefit. If you have been or are being sponsored for education such as a degree or have received some kind of external training / CPD course then that should be taken into account. Not just from a value perspective but also from a repayment point of view. Most companies will require you to repay a percentage of the costs if you leave within a certain time frame. So worth knowing if you owe anything back to your current employer but also does a new employer offer this as a benefit if you planned on using it?

Overtime – Do you get paid for working additional hours? We have all worked more hours than we should have done from time to time – project deadlines, busy periods etc – more often than not it just happens naturally. But do you get anything in return? Again, it varies massively from company to company – some offer nothing (its part of the job – deal with it!), others have flexi-systems that effectively gives you that time back, others pay overtime. So, comparing 2 opportunities – what do they offer? One which offers nothing compared to one paying overtime – easy decision. Time vs money – what’s more important to you?

Other Benefits with a ￡￡￡ Value – There are all kinds of things out there that employers offer which could add value to your package. These include – travel loans (for season rail passes etc), share options, season ticket loans, travel allowances etc. Best thing to do with these sorts of features is to look at what you are currently entitled to / is on offer (and importantly – what you use) compared to what’s on offer elsewhere. If you get shares in your current role and they pay a dividend then that is value you need to account for.

Other benefits and features which are important to take into account…

In addition to the benefits / features that offer a clear ￡￡￡ value you will often find many other benefits detailed in an employment package. These are sometimes referred to as ‘soft benefits’ or ‘nice-to-haves’, incentives etc – call them what you like. However, they should not be overlooked. They might sound ‘soft’ or not automatically show a ￡￡￡ value – but they can if you use them.

Private Healthcare / Health Plans – Again, this is another which varies massively from company to company. However, they can be worth something (particularly given the current state of the NHS). If there is a private healthcare included you can often access services much quicker or see specialists you wouldn’t ordinarily get access to. Many also promote healthy living and can provide incentives etc for those looking to lose weight etc. Some also allow you to add family members to the cover (although there may be an additional charge for this).

Free parking – sounds like a weird one to advertise… however, most employers in the town and city areas don’t have parking facilities of their own. So, either you use public transport or pay for parking nearby. Use Manchester as an example, if you are parking in the city you are going to be paying a minimum ￡6 per day, closer to ￡10 for most if you don’t book ahead etc. At ￡6 per day, 5 days per week, 46 weeks of the year – that’s ￡1380 per year; compared to ￡0 per year for an employer with free parking. Public transport is an option but if you don’t live near a station etc you may be paying for parking to then get the train etc.

Vouchers / free gyms / other incentives – perks as they are often referred to. But again, there’s value to be had – how? If you are currently paying for a gym membership at ￡50pm (￡600 per year) and you can get that for free / at a heavily discounted rate through work you can easily save a few hundred ￡ per year. Childcare vouchers – even more money to saved that you would otherwise have spent. Money off vouchers and discounts – more value to be had again if you can save money on what you are currently spending on / if you are planning a purchase. Add all of these sorts of things together then you could easily be looking at another ￡1000 in value.

Hybrid / flexi working – more of a work / life balance benefit than monetary but again you could be looking at savings on fuel and parking, lunch away from home etc – all of which add up over time as pretty good savings in addition to the time saving and work / life balance you get.

Other Benefits – Theres all kinds of things that companies like to throw into their employment packages – some of which will be useful to you and others that won’t. If you do use any other benefits then do the same above and work out how valuable it is to you.

What to do next…

Once you have worked out the value of your employment package and benefits, add in your base salary and that gives you the total value of your package. It could be relatively straight forward - ￡50K base, 3% pension, ￡5K car allowance and average annual bonus of ￡3K. Total package value - ￡59,500. It could be much more complex – either way – work out your own package bit by bit and you will get the final value figure. Before anyone starts mentioning tax allowances and all the other complicated stuff – yes, I know – however the average person does not need that level of detail.

I know the value of my package, now what…

Simple, keep it in mind when you are looking for a new role, OR, refer to it when negotiating in your current role. Company can’t give a base pay increase because it will upset other people? No problem boss, what can you do for me on pension contributions? Or a car allowance? Bonus? Etc. When speaking to recruiters / potential employers – give them the full picture – you need a base salary of ￡X, however you also need them to account for the amount of ￡X which you get from your current package. Their offer either needs to match or better that value in whatever form – could be a higher base but with less in the package etc.

Final Thoughts

As with all things – common sense rules here. Be aware of what you get / are entitled to in your current package and what value that is to you. Also – USE IT – you can’t be asking for something or putting a value against something if you don’t use it. When you are considering new opportunities – ask for the detail on what is offered in the employment package in addition to just the base salary. Be open and honest about what you receive now – the number of times I’ve spoken to people and even asked what they receive currently in their package, – only to be told its base plus pension; then they suddenly remember when the offer stage comes that they also get a car allowance, bonus and various other perks and it all falls apart.

Above all else, remember to think about what lays beneath a base salary, most of the time it is the tip of the iceberg.