Best way to structure Income Package

planteria

one of my friends has been headhunted and will be having a meeting re. a potential new role later this week. The recruiter has revealed that the company have a budget of 80-100k available for the role.

having asked me my thoughts i thought i would ask here: what is the best way to structure his income, as an employee?

i assume that the company will have a pension scheme in place, and that he will naturally look to see how much they will match, and maximise his pension contributions, but what about going further?

if, for example, it was agreed that they would pay him a 60k salary and a 40k pension contribution, would that be wise? or might he be better to just push for the highest possible salary, and then make his own contributions and claim back tax via his annual return (he's a Director of a company, alongside)?

he wants to be able to show a good income as he's thinking he will want to buy a larger house in the coming years and wants mortgage multiples to work out. at the same time he wants to use his full ISA allowance each year and to build up a substantial pension pot.

we're getting ahead of ourselves, but thought it's a good idea to have a clear picture of what package he would like. any help appreciated.

agrinnall

If he's a director will he also receive shares in the company? It might be best for him to discuss his options with an accountant.

planteria

he owns his own company, but no, he will be an Employee of the company for whom he has been headhunted, with no shares.
he could ask for any mix of Salary and Pension, it seems.

planteria

one thing i'm not sure about is whether it would make a material tax difference whether his pension contributions are made by his employer, or whether all(/the bulk) of his contributions are made by him after he has received the income after tax: that way he can demonstrate a substantial salary to a mortgage lender, and get the tax back when he files his self assessment tax return.

HampshireH

Does the budget include overheads + vehicle? May be worth considering or whether this is just salary costs with overheads as additional costs

jonnygee2

we're getting ahead of ourselves, but thought it's a good idea to have a clear picture of what package he would like.

You are ahead of yourselves. You can change your pension contribution percentage at any time after you start, it's not something thats negotiated during recruitment.

Once he has started and knows the details of the company scheme, post on the pensions board for advice.

planteria

HampshireH wrote: »

Does the budget include overheads + vehicle? May be worth considering or whether this is just salary costs with overheads as additional costs

good question HH. that is something else which he intends to guide. he's been driving a pick up truck most of the time, and he is thinking to try to get them to offer him a commercial vehicle, so that there is no benefit in kind.

planteria

jonnygee2 wrote: »

You are ahead of yourselves. You can change your pension contribution percentage at any time after you start, it's not something thats negotiated during recruitment.

Once he has started and knows the details of the company scheme, post on the pensions board for advice.

fair enough jonny, but he was asking my thoughts in advance and i'm keen to help. i'm interested in whether it would actually be a good idea to have, say £60k salary and £40k pension contribution direct from an employer, or whether the vast majority of that £100k as salary is fine on the basis that they employee would then have the freedom to contribute to their pension pot, and thereby reclaim tax, and be in a similarly good position.

jonnygee2

i'm interested in whether it would actually be a good idea to have, say £60k salary and £40k pension contribution direct from an employer,

This wholly depends on personal circumstances and goals.

I really would suggest starting a thread on the pensions board with details about what kind of savings already exist, distance from retirement, retirement plans, current committed spending etc, and details of what the workplace pension scheme actually looks like.

Without this information no one can give advise on the best way to save or how much to save. The answer is 'it depends'.

planteria

can do, but the headhunter is working with the employer to put together the package, and my friend has been asked again how he would ideally like it to be structured.
Salary/Pension/Bonus/Commission/Vehicle.
fwiw i think they are actually interested in how savvy he is, in terms of personal finances.