Car Allowance Vs Salary

Zebradong

Hi,

I am starting a new job within the same company. I have been trying to negotiate more salary, but they have said all they can do is take £1k from my (£5k) car allowance and add £1k to my current salary.

This sounds pretty pointless to me, as I will only benefit from pension contributions to the tune of £1k per annum. I am now also right on the cusp of the 40% tax bracket, scraping just under.

Is it really worth it?? Or is this just a very token gesture as it appears.

Thanks

Derwent

The reason for giving it as a car allowance rather than salary is twofold for the company.

Firstly, as you have already pointed out, car allowance isn't pensionable and therefore they don't have to make employer pension contributions on that amount.

Secondly, if the company awards an annual % payrise then this won't apply to the car allowance only your basic salary.

It is designed to save them money, not benefit you.

Zebradong

Hi,

So if they move £1k from my car allowance to my salary, then it is a benefit for me - although really, if they are only making a 1% pension contribution, this is surely only £10 per year..?!

I suppose my thought was, if I was trying to negotiate up in the future, I might be able to ask them to pay me in line with peers, who I suspect are on more. Then I would potentially lose consideration of my car allowance in this negotiation, when in take home terms, I may have swindled myself out of £1k. But perhaps I am overthinking it!

Derwent

Your first point is correct.

On the second point, if your aim is to salary match others then you'd be better off with the car allowance in full.