Should i accept a salary reduction for a car allowance

lizzybin50

the company i work for was acquired by another company in January this year. Contracts were subject to TUPE measures. I have been offered a different role in the company that acquired us and they want to move me onto their standard contract.

For my grade they pay a 'car allowance' which doesn't have to be used for a car but is taxed etc but doesn't attract pension contributions.

They want to reduce my base salary by the same amount as the car allowance which doesn't sit well with me. They are saying that other benefits which I currently pay for offset the reduction in pension contributions, but to me base salary is the basis for future pay rises, bonuses etc.

What are the disadvantages and advantages if any of reducing my base salary by the same amount as the car allowance.

Thanks for any advice.

Jemma01

Is this a voluntary offer or a compulsory one? Is it negotiable? I'm not seeing any benefits. I would say no, unless they agree to make the allowance pensionable, and you intend to leave, then maybe.

I wouldn't give up on the salary if I have any long-term intentions to stay with them.

marginalrate

I’d be cautious. Same total pay on paper doesn’t always mean the same value, as salary and allowance aren’t quite the same thing.

Main things to check:

• Pension – if the allowance isn’t pensionable, you could lose out long term.
• Pay rises – if increases are based on basic salary, a lower base could hurt future rises.
• Bonus/redundancy – often based on salary, not allowances.
• Security – salary is usually more solid than an allowance.

Only real upside is if your monthly pay stays the same, but I’d ask them to show the full impact in writing before agreeing. Given TUPE is involved as well, it may be worth double checking with HR, your union, or an employment adviser before signing anything.

XRS200

Base salary tends to be the basis for death in service cover, and also for things like mortgage calculations.

chokrianclinic

Hi,

You're absolutely right to push back on this — it's a classic trick some companies use during TUPE transitions and many employees just accept it without realising the long term impact.

The disadvantages far outweigh any benefits here:

• Pension — This is the big one. Lower base salary means lower employer contributions every single month. Over 20 years this could cost you tens of thousands in your retirement pot
• Pay rises — If they give you 3% annual rise, 3% of a lower base is less money every single year going forward
• Bonuses — Most bonus schemes are % of base, so you lose here too
• Mortgage applications — Banks look at base salary only, car allowance is often ignored completely
• Redundancy — Statutory redundancy pay is calculated on base salary only
• Life cover — Usually a multiple of base salary

The car allowance sounds attractive but:

• It is fully taxable
• No pension contributions on it
• Doesn't count toward most benefits calculations

Before you agree to anything, sit down and calculate your exact net figures under both scenarios. Model your monthly take home, pension gap over time and bonus differences under each option — the numbers will make your decision much clearer.

My honest advice — do not accept the base salary reduction. Ask them to keep your current base and add the car allowance on top. This is completely normal and many companies do it without any issue.

Good luck, hope it works out in your favour

MyRealNameToo

https://forums.moneysavingexpert.com/discussion/6664614/should-i-accept-a-salary-reduction-for-a-car-allowance

How are the other benefits deducted from your salary? Net or Gross? Do they also impact the salary that is used for calculation of other things?

Generally giving up base salary isnt a great idea but you do have to look at things in the round and if the bought benefits are reducing pensions and bonuses already then the impact may not be as significant.