Whats the difference between a benefit and a bottom line salary change?

Smccran

Hello all,
I've had a notification that a previous benefit, a car allowance, is about to become an addition to my salary, instead of a benefit.
For example, if my car allowance was 5k a year, that is being scrapped, and that 5k is being added to my salary instead.
There has been little to no support around this, so I'm trying to figure out what the implications are.
I'll still get taxed on it the same, as it all counted towards total income.The only real impact I can think of is that before any voluntary schemes didn't take that into account. For example, pension payments and charity schemes where I've been paying a percentage each pay check into them. As a car allowance, none of it went towards a pensions etc, but now it will.

Can anyone think of any other impacts to this changing?

Comms69

NI would likely be effected also. 

TELLIT01

Benefits in kind such as company car are not included when calculation pension entitlement, base salary is.  In future pay rises a simple % rise will be worth more when the previous benefit in kind is incorporated in the basic pay.

Dox

It's a surprising move from your employer since it is likely to increase pension contributions (yours and theirs) and if you have a death in service scheme, that is normally a multiple of salary, so the benefit under that would be improved.

I can't see that NI would be affected as you currently receive the car allowance as a salary supplement, so you'd pay the usual NI on it anyway.

JReacher1

A lot of companies have started to do this. They prefer to roll up all benefit payments like this into your salary as it makes it easier to administrate. 

Thrugelmir

Doesn't tie the employer into a long term leasing contract. The car allowance doesn't form part of basic contractual pay and is therefore excluded from pension contribution calculations, holiday pay entitlements etc. 

Dox

Thrugelmir said:

Doesn't tie the employer into a long term leasing contract. The car allowance doesn't form part of basic contractual pay and is therefore excluded from pension contribution calculations, holiday pay entitlements etc. 

A car allowance is paid in cash, so leasing isn't a consideration here. OP has said this is now being added to their salary, so that suggests it is being consolidated - hence the pension contributions would be based on 'base salary' which would include the (former) car allowance; otherwise it would seem to be a completely pointless move, surely?

TELLIT01

The company may give employees the choice of a company car or cash allowance.  If that is the situation it may well be the case that they are phasing out the company car option, and the simplest way to 'normalise' things is to consolidate the allowance into base pay.

Smccran

So the main theme is that any percentage based contributors schemes or benefits may get a bump upwards, but also I'll be contributing more towards them as my base has changed upwards. Other than that, there doesn't seem to be any other impacts.