FOOL'S EYE VIEW
Ten Reasons To Love Your Job!

By Cliff D'Arcy
September 22, 2005

My all-time favourite comic strip is Dilbert by Scott Adams.

Dilbert is an intelligent yet socially awkward engineer who spends his life dealing with the consequences of bone-headed decisions made by his pointy-haired boss (PHB). One thing that tickles me about Scott Adams' take on corporate life is just how accurate his observations are, especially when it comes to managers throwing spanners in the works!

Still, my aim today is to give you a warm, cuddly feeling for your job, by pointing out the financial benefits that it can provides. So, here is a list of reasons to feel good about work!

1. Salary

Of course, none of us want to work for nothing; receiving a wage is the key reason for working in the first place! In truth, we should be grateful to have a job, as almost a quarter (25%) of all working-age people are not working for one reason or another.

Still, it's worth ignoring all the nonsense spouted about 'average' UK salaries, because, in the real world, your income will vary enormously based on your occupation, hours worked, age, gender and geographical location. There are almost 25 million employees in the UK, with the lowest-paid tenth (10%) earning a median average hourly wage before deductions of £4.84. The highest-paid tenth earn a median average of £18.70 an hour, which is almost four times as much.

Save some of your pay in a great Savings account!

2. Pay rises

If your pay didn't increase each year, the buying power of your money would reduce from one year to the next, thanks to inflation (rising prices). Hence, pay rises often include an inflation-linked element, as well as merit awards for individual performance, profit-related amounts, etc.

One piece of bad news is that inflation is on the rise again (it recently hit an eight-year high), so no pay rise means that your salary is effectively being eroded. Indeed, your personal inflation level will vary according to your spending pattern, as I explained in What Inflation Means To You, so it won't exactly match the 'official' headline rate. Then again, you can try to win a bigger share of the pay-rise pot.

3. Commission and bonuses

If your total earnings depend on hitting, for example, sales targets, then your income may vary from month to month. People in this situation, such as estate agents, need to learn to budget extra carefully in order to get through the quiet months. Indeed, a reduced income caused by loss of overtime or commission accounts for more than a quarter (26%) of mortgage arrears, as this article shows.

If you're fortunate enough to receive an annual bonus, think twice before rushing off to spend it! In my reckless days before I discovered the Fool, I once lost a large annual bonus in a single visit to the casino. Madness! These days, I pump any additional income into my pension or invest it elsewhere. This 'pay yourself first' approach also works with pay rises: most of my April pay rise went straight into my pension. I haven't missed this money because my salary is unchanged, but it's now working hard on my behalf!

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4. Pension

Thanks to a huge post-war boom in membership of company pensions, many of today's pensioners enjoy a higher standard of living. The ideal scenario would be to work for a firm for, say, forty years and retire at sixty-five to enjoy a guaranteed, inflation-linked pension of two-thirds of your salary at retirement. Sadly, those days are long gone, as many firms can no longer afford to support the cost of providing guaranteed pensions. Five out of six FTSE 100 firms (the UK's one hundred biggest listed companies) no longer allow new staff to join a final-salary scheme.

These days, when you start a new job, your employer is likely to offer you membership of a money-purchase scheme, where your retirement income will depend on the contributions made and returns earned while this money is invested. Nevertheless, joining a company scheme is almost always a better bet than setting up your own pension, especially if your firm bears the administration costs and, even better, contributes to your pot.

Learn the difference between Stakeholders, SIPPs and other plans in our Pensions centre!

5. Life cover

Many firms provide 'death in service' cover for employees, which pays out a lump sum to beneficiaries nominated on an 'expression of wishes' form. Typically, a firm will provide cover of, say, three times basic salary, with the group policy being written in trust to avoid inheritance tax.

For people with financial dependants, such as a spouse, partner or children, this is a hugely valuable benefit. Indeed, for many people, their death-in-service cover is their only source of life insurance! What's more, thanks to bulk buying, a group policy is much cheaper than a set of individual policies.

Get discounted life cover in our Insurance centre!

6. Sickness pay

Although an employer must pay Statutory Sick Pay (SSP) to employees, there is no legal requirement for it to pay enhanced sickness pay. SSP begins after four days and is normally paid for up to 28 weeks in a row. However, the current SSP rate is a mere £68.20 a week, which is hardly generous!

Hence, many employment contracts provide enhanced sick pay, usually at managerial discretion. For example, your contract may state that you are entitled to full pay for, say, the first three months, followed by half-pay for the next three months. Some enlightened employers go even further by providing income protection insurance, which pays monthly benefits if you are too ill to work. Most policies have an initial exclusion period of, say, six months, which often coincides with the end of company sick pay. As these benefits are usually tax free, these policies don't pay out your entire salary; a typical limit would be half of your gross pay.

Get cheaper income protection insurance in our Insurance centre!

7. Childcare vouchers (CCVs)

For many parents, the cost of childcare is one of their biggest household bills. For example, day care for my two children at a private nursery costs over £100 per day. Ouch! The bad news for parents is that there's no tax relief on childcare costs, so they just grumble and stump up. However, since 6 April, childcare vouchers provide a valuable tax break. Parents can now receive tax-free vouchers worth £50 a week, which can be used to pay childcare bills.

For example, my wife has sacrificed £2,600 of her gross annual salary in return for £2,600 of vouchers. This leaves her £1,066 a year better off, because CCVs do not attract income tax or National Insurance contributions (NICs). This £1,066 is made up of savings of 40% tax (£1,040) and 1% NICs (£26), but your saving will depend on your tax status.

Both parents can claim CCVs, so a high-earning couple could save £2,132 a year by receiving CCVs worth £100 a week. Employers also benefit, because they don't have to pay employer NICs worth 12.8% of the income sacrificed, which helps to fund the cost of proving the scheme. It's a win-win deal! Be warned: CCVs may affect your entitlement to certain means-tested benefits, so do check before joining a scheme of this type.

Check out our Saving for Children centre!

8. Sharesave

I explained how this shares-based savings scheme works in Make 32% A Year, Tax Free! In essence, employees save a monthly amount of between £5 and £250 for three or five years and, when their Sharesave matures, they use this capital, plus a guaranteed tax-free bonus, to buy shares.

As an added benefit, your buying price can be at a discount of up to a fifth (20%) on the market price before your scheme began. In other words, even if the share price hasn't budged since you started saving, you make a decent return, because you're buying at below the prevailing market price. Despite their obvious attractions, fewer than one in ten employees are members of a Sharesave plan. That's crazy, because the rewards can be huge!

For example, I encouraged one of my chums to pay £250 a month into a five-year Sharesave scheme. His £15,000 plus bonus turned into around £50,000 of shares, thanks to strong growth in his firm's share price. What's more, thanks to some cunning tax planning, he didn't pay a penny in tax on this £35,000 gain. So, the next time that your employer offers you the chance to join a Sharesave scheme, bite its arm off!

Buy and sell shares cheaply with our Online Brokers centre.

9. Share Incentive Plans (SIPs)

SIPs, another all-employee shares-based savings scheme, also offer attractive benefits. You can invest up to a tenth of your salary into a SIP, subject to a limit of £125 a month. Instead of discounted shares, your employer can give you matching shares, up to two for each one bought. The good news is that paying in £125 a month doesn't mean losing £125 from your take-home pay, because you get tax and NICs relief on your contributions. You can learn more about Share Incentive Plans at the ifsProshare website.

Here's an example: you join a "BOGOF" SIP (one that offers "buy one, get one free") and pay in the maximum £1,500. Hence, you receive £3,000 of shares each year, but if you're a higher-rate taxpayer, you get 41% relief on your £1,500, so it only costs you £885. In other words, even if the share price stood still for years, every £1 handed over would be worth £3.39 from day one. For tax reasons, it's best to hold these shares for five years, at which point you can withdraw the shares without paying any income or capital gains tax. Fantastic!

10. Subsidised or interest-free loans

Your employer can provide you with a subsidised loan or mortgage, so you pay a lower rate of interest than you would by borrowing from a bank. However, you do have to pay tax on the difference between your subsidised rate and the 'official rate' in force at the time. Usually, even after accounting for the extra tax, borrowing from your employer is likely to be considerably cheaper than even the top Best Buy loan.

The good news is that you don't have to pay income tax or NICs on your loan if it is less than £5,000 and you pay it back in full. So, for example, your employer can help you with your travelling costs by providing you with an interest-free loan for your season ticket. This enables you to spread out your travel expenses over ten or more months, interest free.

We have great deals - including the UK's lowest-rate loan - in our Personal Loans centre!

Naturally, only the biggest and best employers will offer all the benefits listed above, but most employees should receive at least a few of these. In addition, your employer can offer you other benefits, such as a company car or allowance, private medical insurance, subsidised cafeteria, staff discounts and so on.

I hope that this article has helped you to see your employer in a new light!

More: Find great deals in our Personal Loans, Savings, ISAs, Insurance, Online Brokers and Pensions centres.