Thousands of Irish employees had their benefits reduced or cut as a result of the recession. A report by Mercer, an employee benefits consultant, found that bank workers had lost a range of benefits such as club subscriptions, life assurance payments and health insurance. Other businesses are also reviewing their employees’ benefits, such as company cars and subsidised health insurance, in their efforts to cut costs.
“A number of multinationals and Irish companies are re-evaluating the health benefits they offer to employees,” said Priscella Sweeney, a healthcare consultant at Mercer. “With a possible 30% increase in costs, imminent employers may either reduce health benefits or move to a cost-sharing approach with employees.”
With employer-sponsored benefit packages being hit, we outline the state-backed benefits you can use to save you money .
Since 2009 you can get tax relief on the cost of a bike and associated equipment, such as helmets, via a participating employer.
Under the Cycle to Work scheme your employer pays for the initial cost of the bike then recovers the cost from your pre-tax salary by way of a salary sacrifice agreement over the following 12-month period.
If you are a higher-rate taxpayer, this means you can effectively purchase a bike worth 1,000 for only 480, which you can pay off in instalments of 40 over 12 months. If you’re taxed at the lower rate, you save 31% of the cost.
You don’t have to wait until the bike is fully paid for before you receive it and the deal is not subject to benefit in kind (BIK) tax.
According to a report published by the Irish Bicycle Business Association, 140,000 bikes were purchased under the scheme up to 2013. Those involved in the initiative say that the number is now far higher.
“It’s more popular than ever,” said Iain Cameron of travelhub.ie, a company that administers the scheme for employers. “We thought interest would taper off, but we are selling more bikes than even in the first year.”
Employees of participating companies can buy discounted rail and bus fares under the Taxsaver commuter ticket scheme.
The scheme operates under the same principle as the Cycle to Work scheme and enables top-rate taxpayers to pay for their season tickets at a discount of up to 52%.
You either pay for the ticket from your gross salary using a salary sacrifice agreement or your employer pays for the ticket as a tax-free addition to your current salary. Your employer can also give you the ticket in place of a cash bonus.
There are big savings to be made by purchasing bus and rail tickets under the scheme.
“The average [annual] price of bus and rail tickets is about 1,500, so you’re saving 780,” said Cameron.
“Some tickets can cost up to 4,000, so you could save more than 2,000.”
Cameron said that the success of the Taxsaver and Cycle to Work schemes showed that people were moving away from cars in favour of bikes and public transport.
More than 3,500 companies have signed up with Bus Eireann to purchase tickets under the scheme.
If you use your car for work purposes and your employer doesn’t reimburse your costs, you can claim tax relief from Revenue.
The relief is calculated based on the cost of your car’s running expenses and also wear and tear while being used for work purposes. You can’t, however, claim the benefit for your regular commute.
To claim running costs you need to work out your total running costs – including fuel, tax, insurance, repairs and servicing – and calculate how much of these costs were incurred through business use.
You do this by calculating the distance travelled for business in relation to the total distance driven and applying this ratio to the overall cost.
The relief is calculated at 12.5% of the car’s cost, subject to limits, for business driving only. So if your car cost 20,000 and 20% of your driving was for business purposes, you can claim £500 – £20,000 x 12.5% x 20%. If your claim succeeds, Revenue will adjust your tax credits accordingly.
WORK FROM HOME
The benefit to an employee of a flexible working arrangement is not just limited to the time savings – it could also have financial benefits, say workplace experts.
“Working from home can have a real benefit from a personal finance perspective as well,” said John Ryan, chief executive of consulting and training firm Great Place to Work. “It’s not just the flexibility of being able to work from home, it’s the pound, shillings and pence of not having to drive your car in every day and pay for parking.”
If you work from home, you can get tax-free payments from your employer of up to 3.20 a day to pay for electricity costs.
Your employer can also furnish your home office with computers, printers, scanners and other office equipment without the cost being treated as a BIK.
Some employers offer their employees the ability to buy shares in the company at a discount.
Under a Revenue-approved save-as-you-earn scheme, you can save between £12 and £500 a month of your salary for a pre-determined period of three, five or seven years.
At the same time, you are granted an option to purchase shares in the company at a discounted price to the current share price. This discount can be up to 25%.
At the end of the agreed period you can use your funds to buy the shares at the reduced price or elect to take the proceeds as a tax-free cash sum.
If you elect to take cash rather than shares, the interest earned is exempt from deposit interest retention tax, currently 33%.
Any profit made on the sale of shares, however, is liable for capital gains tax, also currently 33%.
If your employer pays for your health insurance, you could be missing out on tax relief. This is currently 20% of the cost of the premium. When an individual purchases health insurance, the relief is granted at source. When your employer pays the premium, you have to claim the relief yourself.
“If you are paying for your own health insurance, the tax break is already built in to the price, so you are paying the net amount,” said Orla Linehan, principal at Fidelia Chartered Accountants in Cork.
“When employers pay for it, you have to claim that tax back yourself.”
She added: “A lot of people forget to do that because they assume it’s all taken care of in payroll.”
PENSION TAX RELIEF
Employees can take advantage of significant tax relief when contributing to a pension. The relief on contributions is calculated at your marginal rate of tax – 41% for higher-rate taxpayers, subject to certain limits. There is no relief against PRSI and the universal social charge.
Most members of company pension schemes automatically receive tax relief on pension contributions via their company’s payroll.
It you have a personal pension, however, you need to claim the relief yourself. You can claim relief for pension contributions made in the past four years.
Employees at some companies can take advantage of discounts and rewards for a range of products and services.
Companies such as Hubex and dealhub.ie provide rewards and benefits platforms that firms can use to offer their employees negotiated discounts in shops, hotels and gyms.
You can also receive a non-cash bonus from your employer worth up to 250 in any one tax year. Probably best known as the Christmas bonus, it can be given to an employee at any time during the year. It is not treated as a BIK and does not incur PAYE or PRSI taxes.