Money: Don't let perks pass you by

Take a close look at the benefits on offer at work
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The Independent Online
WHEN you go to a job interview, don't get fixated on pay. You should also take a long look at the extra benefits on offer. You are probably not going to be too impressed with a potential employer whose idea of employee perks is handing out a couple of luncheon vouchers. But if you are offered something more valuable than this, you need to work out a money value for the perks and to decide whether or not it's worth bothering to pay extra for what's on offer.

Forward-thinking companies have been working hard to attract and keep good staff. In recent years a large number of employee benefit consultants have sprung up - proving that this is a growth business.

It's laudable that firms want to improve their benefits packages, but many undo the good work by forgetting to remind staff of what's on offer. If you join a company but aren't eligible for a pension, or any other benefits, until you have been there for three or six months, you aren't likely to remember what you were told at the job interview. How many employers actually chase up their staff to enquire whether they have come to a decision on their pension?

Not many, according to Nigel Chambers, deputy managing director of Johnstone Douglas, an independent financial adviser specialising in employee benefits. He says: "It is quite discouraging to see how many people forget about their company pension option after they have successfully served their probationary period. There are companies that allow employees to be eligible for benefits from the first day of employment and the take-up rate in these cases is good."

As long as the economy remains relatively stable, the climate is still suited to the employee calling the shots. So how should you approach the issue of benefits if you are considering joining a new company?

q Ask to see details of the overall benefits package at your interview (if being offered the job is a clear possibility). In the same way as your employer will not officially offer you the job until your references have been checked, don't sign your contract until you are clear that the benefit package stands up to close scrutiny.

q While money is not a long-term motivator, few would take a job with a pay cut. It is important to add up what the overall package is worth to you rather than focus on the salary.

There may be annual or six-monthly bonuses, performance-related pay structure, a company car, a company share option scheme and a subsidised or even free canteen. These options could make a difference of several thousand pounds a year.

q The disadvantage of employee income protection, private medical insurance and critical illness cover is that the cover ends on the day you leave the company. With an individual plan you have cover as long as you pay the premiums.

Even so, there are distinct advantages to the protection offered to you as part of an employee benefits package: because you are part of a group scheme the costs are significantly lower. Even more importantly, with group schemes there is no requirement to undergo medical examinations of any kind or provide history of illness in the family. For some people, group schemes offered by their employer provide cover they would otherwise be denied.

It is becoming more common for employers to provide further information on what you are entitled to and how much the "extra" options you choose will cost you. Otherwiseit might be worth consulting an independent financial adviser. Something else to look out for is an employer that can provide personal loans at cheaper rates than banks or other lenders.

A number of UK firms are starting to offer more sophisticated packages. These operate on a cafeteria basis - you can pick and choose the level and type of benefit you want. These packages may include "core" benefits - a company pension, income protection, private medical insurance, life cover and critical illness cover - plus other benefits such as holiday flexibility - allowing you to buy or sell holiday time, heath checks, dental cover, health club membership and childcare vouchers.

q David Burrows is deputy editor of 'Planned Savings' magazine.

Take a 32-year-old married male on a basic annual salary of pounds 15,000. He has a free benefits package worth pounds 540.65. This is made up of:

Holiday entitlement of 25 days, worth pounds 288.45. (Based on a minimum of 20 days, worth nothing, and a maximum value of 30 days, worth pounds 576.90).

Life cover of four times salary, worth pounds 52.20.

Private medical insurance: worth pounds 200 a year.

As this man works for a firm offering a "cafeteria" benefits package, he can buy or sell benefits, and his salary will drop or rise accordingly. So he decides to tailor his own benefits package:

Holiday entitlement drops to 22 days, giving a flexible credit value of pounds 115.38.

Life cover of twice his salary, costing pounds 26.10.

Upgrades PMI cover to include his wife, costing pounds 400.

No critical illness cover.

Income replacement cover at a cost of pounds 250.

Dental cover for himself at a cost of pounds 103.20.

Total: pounds 894.68.

To find out how much this will cost him, subtract the starting figure of pounds 540.65 from the pounds 894.68. So pounds 354.03 is the actual cost of the increased benefit. He'll have to pay for the extra cover and it works out at pounds 29.50 a month out of his salary.

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