Workplace pension preventing me from getting a pay rise

DanAboutTown

Hi,

My employer has recently enrolled all employees in the new workplace pension. However, this has happened at a time that I was due for a pay review. I spoke to my employer today, and she told me that she would not be increasing anybody's pay, as she saw the workplace pension as a sufficient benefit.

I was under the impression that the workplace pension did not adversely affect the employer, as they were able to claim everything back in tax breaks. Also, with it being a compulsory scheme, I do not see why I should miss out on a pay review because of it. I would appreciate hearing anybody's thoughts on the matter.

hugheskevi

I was under the impression that the workplace pension did not adversely affect the employer, as they were able to claim everything back in tax breaks.

The employer can use employer pension contributions against profits to reduce corporation tax and no employer National Insurance contributions are due on the payments, but it is far from a 100% tax break.

Also, with it being a compulsory scheme, I do not see why I should miss out on a pay review because of it.

The Department for Work and Pensions acknowledged other parts of the remuneration package would be reduced or held back, eg, see page 7 of this Impact Assessment which estimates about 50% of the cost of the additional employer contributions will be saved through lower pay increases and such like.

I would appreciate hearing anybody's thoughts on the matter.

Your total remuneration package has increased. Whether that is through pension or salary, your employer has to set aside more to meet that cost, just as they would a pay increase.

You have, sort of, had a pay review - as a result of which, your employer decided to freeze your salary. As with all jobs, if the remuneration package isn't satisfactory, it is time to try to renegotiate or find alternative employment.

ozzage

Do you have other pension arrangements? Were you already making contributions?

dunstonh

I was under the impression that the workplace pension did not adversely affect the employer, as they were able to claim everything back in tax breaks.

Not correct. It is a business expense and only benefits in a corporation tax reduction and possibly NI depending on whether a pay rise would have existed in its place. Typically around 20-25% depending on how the pension is structured.

Also, with it being a compulsory scheme, I do not see why I should miss out on a pay review because of it.

You have had a pay review. It was nil increase.

redbuzzard

This must be a fairly sizeable employer unless they have implemented auto-enrolment before they had to? So they probably have their ducks in a row as regards what they can and can't do, and how they do it.

It's mean, but up to them unless you had a contractual agreement around pay increases. Nothing to stop you trying to negotiate, but it's their choice.

I and my colleagues had several benefits removed or reduced between 2009-2011 in the name of cost saving, by far the costliest of which was the closing of a very good DB pension scheme.

Sympathy. Can you get any more value out of them in matched contributions to your new pension? Always assuming you can find the extra cash, which I appreciate may not be the case.

MEM62

Look at it this way, what your employer is paying you has increased. It's just that the extra is going into a pension and not in your pocket - something you'll be grateful for when you retire.

GhIFA

I was under the impression that the workplace pension did not adversely affect the employer, as they were able to claim everything back in tax breaks.

They don't pay corporation tax on the contributions, they can't claim back the contributions paid though. If they haven't previously been making employer pension contributions then it is an increased expenditure for the business, and will increase over the next few years as the minimum payments increase (if they haven't gone straight in at the minimum 8% combined contribution that will eventually apply).

Also, with it being a compulsory scheme,

Just to clarify, it isn't compulsory - you can opt out. This won't make any difference to the situation with your pay review (and you'd be turning down free money being offered by your employer) but it is important to note.

I would appreciate hearing anybody's thoughts on the matter.

Have you made any plans for your retirement?

xylophone

Someone I know used to work for an organisation with a non-contributory FS pension scheme - at the yearly salary increase negotiations, the staff used to point out that what they were awarded was less than their "comparators" were receiving. The answer? You've guessed it!:)

DanAboutTown

Thanks for your help everybody. It seems that, while the company hasn't done anything wrong per se, the amount that we are being given in pension contributions is much less than we would be entitled to during a pay review. Personally I think the boss is hiding behind this fact...

Moby_Tide

DanAboutTown wrote: »

Thanks for your help everybody. It seems that, while the company hasn't done anything wrong per se, the amount that we are being given in pension contributions is much less than we would be entitled to during a pay review. Personally I think the boss is hiding behind this fact...

As a pay review could result in no change or a reduction in salary it's interesting what you think you are entitled to

ViolaLass

DanAboutTown wrote: »

Thanks for your help everybody. It seems that, while the company hasn't done anything wrong per se, the amount that we are being given in pension contributions is much less than we would be entitled to during a pay review. Personally I think the boss is hiding behind this fact...

And where is this entitlement promised to you?