Bonus & Pay Cut - Legal?

cosmicbeard

Greetings all,

Apologies if this is in the wrong section. Would it be legal to take a bonus of £20k, and a pay cut of £5k for four years - effectively paying the bonus back over four years?

Many thanks.

anselld

Yes, provided you pay the correct tax and NI at each point in time.

cosmicbeard

What tax, NI, student loan would I be charged on a £20k bonus? I work out about £9k with thesalarycalculator.co.uk

chrisbur

cosmicbeard wrote: »

What tax, NI, student loan would I be charged on a £20k bonus? I work out about £9k with thesalarycalculator.co.uk

Your deductions from your bonus will to some extent depend on what your other earnings are so no-one can give a definate answer without the full earnings details for the year.
Had a quick look at thesalarycalculator and as far as I can see it has not been programned to account for the upper earnings limit when it does a bonus calculation so shows a wrong figure for NI.

somethingcorporate

How much do you earn? If the £20k takes you into the top bracket you will be losing quite a chunk of it. Given we are approaching the next tax year could they not pay you £10k this year and then £10k next year either side of the cut-off if it keeps you under the 40% bracket? That could save you a considerable chunk.

Cook_County

If your future pay is below the minimum wage it may not be legal.

BobQ

Im not sure how Student Loan repayments work in detail but I recall being told by a recent graduate that anything which you receive as "pay" (ie with salary) counts as income for student loan purposes. This includes bonuses,allowances [STRIKE]and taxable benefits.[/STRIKE] You would have to check this however as its just what I was told,

somethingcorporate

Bonuses and allowances yes - taxable benefits (from my experience) such as private healthcare allowance, dental etc no.

BobQ

cosmicbeard wrote: »

Greetings all,

Apologies if this is in the wrong section. Would it be legal to take a bonus of £20k, and a pay cut of £5k for four years - effectively paying the bonus back over four years?

Many thanks.

Would it be legal to take it? You can choose to work for whatever you wish although they need to pay the minimum wage to be lawful.

To answer your question directly, such a change cannot be implemented compulsorily as your pay is determined by your contract. So if that contract allows this change they may be able to do this. But whether such a clause would be legal I do not know. If its not explicitly identified they cannot do it compulsorily.

This is why it seems that your employer is trying to do this on a voluntary basis. I assume you are not a member of a trade union, so you need to be clear what you are agreeing to and why. This may help
http://www.lawyerlocator.co.uk/lawyer/legal_issues/get_article/id/149/Can-I-cut-the-pay-of-my-staff/

On the face of it this is an unattractive offer in terms of its impact on you in tax , student loan and NI, reduced redundancy pay etc So the only reason for volunteering is if there is something in it for you. Are you worried about being made redundant? If so it may be a reason to agree. Otherwise, what do you gain from it?

If you accept the case for a voluntary change you should try and negotiate something more advantageous with more guarantees- see the link.

BobQ

somethingcorporate wrote: »

Bonuses and allowances yes - taxable benefits (from my experience) such as private healthcare allowance, dental etc no.

Thanks for correcting my misunderstanding.

somethingcorporate

BobQ wrote: »

Thanks for correcting my misunderstanding.

For a bit more background on this thread suggest you have a look at the OPs one before: https://forums.moneysavingexpert.com/discussion/4346353

It explains a lot.