Pay rise vs bonus

Petko

Hi,

First of all I’m not sure is this the right forum , my apologies if not.

I’ve asked my employer for a pay rise. He accepted it but suggested to allocated it as part of the pay rise in my pay slip, and the rest paid as a bonuses at several points later in the year.

Can someone explain how beneficial this is for the employer?
Also is there any down side for me if I accept this deal? Or I should insist to get everything via pay slip?

Thank you in advance

k3lvc

As an employer it's an easy one - bonuses tend to be discretionary, they can be linked to performance/achieving things, they can be easily removed the next year and they're generally not counted for pension payments etc

calcotti

A downside for you is not having a regular income which may make planning or budgeting mor3 difficult. Also if you lose your job just before a bonus you have missed out on money.

[Deleted User]

Example if you went to a lender for a mortgage they wouldn't count bonuses as income.

TELLIT01

For the employer the benefit of paying bonus rather than pay rise is that the bonus is a one off. For example you may be offered a 10% bonus or a 1% payrise. By year 11 the employee is better off by taking the pay rise and that benefit increases year on year. In reality the timescale is shorter, assuming annual pay increments. Bonus payments don't count towards pension either, so the employee loses out that way too.

DigForVictory

Much easier for you to have it all on the payslip for evidence of income, for the addition to your pension & a higher salary usually stays higher.

I'm just both naively as long as I can see it I know I can account for it & also massively untrusting - as long as its on my payslip not only am I paying the right tax & getting the right pension etc, So Is My Employer. Well, so I hope.

Congratulations on both asking for & getting a rise! And again for coming here to bombproof your financial wellbeing.

Petko

Thank you. Really appreciate your answers

So financially for the employer the only benefit is it doesn’t count to pension contribution, they will still need to pay NI on the bonus?

Form my side, expect an application for mortgage, will bonus be counted for any other type of loan e.g. for a car?

Also I assume from tax point of view there using any difference?:D

TELLIT01

No pension contribution is not the only benefit for the employer. As I said previously, a bonus is a one off payment, a payrise continues year on year and will eventually cost the employer much more.

Petko

Of course I understand that side of the deal. They can pull at any time. I’m just trying to build a strong case here, to see is there actual any money benefit for them and how much the will save of they pay me in let’s say 4 bonuses spread across the year instead every month.

When you say they will save in pension contribution how much is that exactly in percentage. To be straight away how much they will save on £20k annually for higher tax payer?

Thank you

k3lvc

Petko wrote: »

When you say they will save in pension contribution how much is that exactly in percentage. To be straight away how much they will save on £20k annually for higher tax payer?

Wait ? Are you suggesting we're talking about a £20k 'bonus' here ?


If so you'd be mad to accept this as a bonus rather than salary :eek:

Petko

No,

I’m saying I asked for a 20k pay rise. My boss accepted that, but a few days later came back to me and said, you will still get 20k more but part will be in the pay rise and 2nd part will be split in 4 regular bonuses across the year.

And this scenery will repeat each year.

My question is to figure out how much company will save if pay me let’s say 10k in bonus instead as the pay rise. (Please ignore uncertainty of bonus repetition)