Benchmarking salary and inaccessible car allowance benefit

[Curtley-Óg]

Last week, following an application/interview process, I received an offer for an internal role which involves an increase in pay grade.
The increase is ca 13%, along with a car allowance of ca Eur 175 / month after tax (and adjusted for my working 3 days per week, which I have since 2015)
This promotion is only my second change of grade in over 13 years with the company, the last being in 2013.
While it is a decent offer, I want to make sure it is fair in terms of base salary and also have concerns the car allowance is not in my best interests to avail of.

In terms of my financial priorities over the next 5 years...
I am doing my utmost to buy my own home as a first time buyer, and have been doing everything possible to save/maintain a deposit along with applying for (successfully, thankfully) local authority home loans in several counties in which I would be happy to live.
As soon as I manage to own my own home, I will max out my pension AVC's. I have about 22 years to retirement and definitely need to increase my contributions.

There are two main areas I wish to negotiate regarding the offer I have received:
1. Whether it is fairly bench-marked internally against similar senior roles, as well as with those in wider industry. I suspect that a simple percentage (10% max for internal moves + 3% increase being applied across the board this year based on company/personal performance) has been applied on my current salary, which pushes me into the next grade, but may well be relatively low in that grade. Ie such that I am paid less than colleagues in equivalent roles, hired in the past 2 years with less experience than me.
2. Whether the car allowance can be simply changed to contribute to my gross salary. I get that the company will then need to make pension contributions on that amount, but shelling out on a car deposit (even if the Eur 175 / month would make a meaningful dent in monthly PCP payments) , is very far from my financial priorities currently. I own a 2000 Skoda Octavia since 2011 which has sailed through every NCT to date. My strong preference would be if I could get another year or two out of the car, while building up savings for a decent 2nd hand car after I own my home. I feel like the car allowance is forcing my hand to get locked into the PCP eco-system, and can't see how to make the allowance work for me. Note the car allowance requires me to drive a car less than 7 years old rolling basis (the age of the car, not the car itself!!)

Overall I may be in the thick of thin things being overly-distracted by point 2. Would I be better focussing fully on point 1? If I could negotiate a 25% salary increase (with no car allowance obviously) it would be equivalent to the 13% increase + car allowance. This may sound like an outrageous increase, but I am starting from a low base for my experience/career stage (my perceived ability to take on responsible roles has suffered due to part-time working since 2015). I am considering requesting a bench-marking of my salary to account both that I am based in Ireland (colleagues from same discipline/grade in the UK appear to be relatively higher paid than me, despite lower cost of living there) and impact of inflation in recent months.

I would be grateful for thoughts on what I should focus on when negotiating the salary for the new role - is it a solid strategy to focus on benchmarking for location/similar roles internally/externally? Would folks agree the car allowance will cost more than it will benefit me given my financial priorities, or am I missing something as to how I could make it work for me?

Thanks in advance.

 

[Gordon Gekko]

Isn’t a car allowance just non-pensionable salary?

i.e. there’s no requirement to spend it on a car.

 

[sm7940333]

Agreed with Gordon. It's a way for them to give you a pay rise now, without having to pay for a pension on that pay rise later! If it doubt, check the contract...

I'm always amused by internal candidates assuming they can negotiate - are you going to walk away & not accept the role? Stay at your current level? If you do feel that you are under-paid for your performance, I would suggest you request that your hiring manage give you a salary review next year. There may also be internal controls on how much of a rise you get in a year - a higher % may require higher levels of organizational approval.

 

[Peanuts20]

Why are you assuming you have to spend the car allowance on a new car?. I've never heard of a company insisting that it gets spent on a new car and demanding a receipt. For most companies it's a way of making a role more attractive without the additional impact it would have on pension and potential redundancy payments and a lower mileage/expense rate since you are already getting a car allowance.

 

[nest egg]

....I'm always amused by internal candidates assuming they can negotiate - are you going to walk away & not accept the role? Stay at your current level? If you do feel that you are under-paid for your performance, I would suggest you request that your hiring manage give you a salary review next year. There may also be internal controls on how much of a rise you get in a year - a higher % may require higher levels of organizational approval.

As an internal candidate, unless you have another offer, you don't have much leverage. One suggestion, some employers have started to provide benchmark data for pay transparency reasons, you could ask if they are willing to show you what you're being benchmarked against. Pick your battles though, you need to decide beforehand what you will do if they are underpaying you, before going down this path.

Regarding car allowances, they are just income, minus some of the bells and whistles of your core remuneration.

 

[Curtley-Óg]

Isn’t a car allowance just non-pensionable salary?

i.e. there’s no requirement to spend it on a car.

Thanks @Gordon Gekko . I gave citiziens information a call today and they were very clear the benefit would be entirely at the company's discretion, and subject to whatever conditions they specify in writing. So if I wasn't spending it on a car, they would be entirely within their rights to withdraw the benefit it seems!

 

[Curtley-Óg]

Agreed with Gordon. It's a way for them to give you a pay rise now, without having to pay for a pension on that pay rise later! If it doubt, check the contract...

I'm always amused by internal candidates assuming they can negotiate - are you going to walk away & not accept the role? Stay at your current level? If you do feel that you are under-paid for your performance, I would suggest you request that your hiring manage give you a salary review next year. There may also be internal controls on how much of a rise you get in a year - a higher % may require higher levels of organizational approval.

thanks @sm7940333. Good point to check the contract - as I say to @Gordon Gekko above it appears the benefit is entirely discretionary and I'd need to abide by the written terms. Not seen the details in writing yet though, so you make a good point.

As for my approach to negotiating - I'm well aware I'm not in a strong position but I'm also of the "don't ask and you don't get" school of thought. All they can say is no, but I'll do my best to be well informed before asking! Thanks for the thoughts on salary review - I guess I'm hoping I can get a fair benchmarking in one go through this new role... you're absolutely right that it may require higher level of approval, as the HR guy did confirm there was a 10% cap on rises for internal changes in grade. I guess I'm hoping 13 years of service may count for something, given this would only be my 2nd benchmarking in that time.

 

[Curtley-Óg]

Why are you assuming you have to spend the car allowance on a new car?. I've never heard of a company insisting that it gets spent on a new car and demanding a receipt. For most companies it's a way of making a role more attractive without the additional impact it would have on pension and potential redundancy payments and a lower mileage/expense rate since you are already getting a car allowance.

Thanks @Peanuts20 ! It may turn out to be less formal, but as far as I've been told and subject to me seeing it in writing I believe the newer than 7 year old car requirement is a condition the company can very well set. They say it is to promote sustainability which I don't believe for a second, but citiziens information mentioned it may be a warranty in the company's insurance policy covering employees driving for work. I know I already need a clause in my own personal car insurance to drive for work, but there may also be a company group insurance clause - not sure but if so it would mean the company would have to be seen to apply the requirement strictly to anyone receiving a car allowance.

 

[Curtley-Óg]

As an internal candidate, unless you have another offer, you don't have much leverage. One suggestion, some employers have started to provide benchmark data for pay transparency reasons, you could ask if they are willing to show you what you're being benchmarked against. Pick your battles though, you need to decide beforehand what you will do if they are underpaying you, before going down this path.

Regarding car allowances, they are just income, minus some of the bells and whistles of your core remuneration.

Thanks @mojoask! Much appreciated - you're absolutely right I don't have much leverage and I would be careful about pushing the boat out too much. Excellent suggestion regarding benchmark data - this I will follow up. I had in mind to ask but didn't know it was becoming more common. Fair point about picking battles, I'll think this one through... in one way if nothing else, it'll clarify how much scope there is for my salary to grow in the role, and to provide a basis with manager on development goals to get me there...

Yep, I believe you're entirely correct regarding car allowance being (taxable) income.

 

[Curtley-Óg]

Thanks all for your perspectives - much appreciated!

On my core salary I plan to request an upper and lower range to the grade I'm in, considering cost of living in Ireland (most of my colleagues are in UK). I have been told my salary is about middle of the band, and if nothing else getting transparency on upper and lower brackets will confirm whether this is the case.

Regarding car allowance my perhaps simplistic view is that until I can save the amount for a 3 - 5 year old car, optimistically for ca. Eur 15k, I simply can't afford it. I value not being in debt a lot! There is a lot of freedom in it. So I don't feel like taking out a loan for say Eur 15k, even if I can service some of this debt with Eur 175 / month from a car allowance.

I plan to be upfront with my employer that my financial priorities are owning my own home and then to max my pension contributions via AVCs. In light of this, whether they can do anything to convert the car allowance to something closer aligned with my financial needs. To the best I can determine I don't believe it is financially prudent for me to take on debt to buy a younger than 7 year old car.

 

[sm7940333]

Regarding car allowance my perhaps simplistic view is that until I can save the amount for a 3 - 5 year old car, optimistically for ca. Eur 15k, I simply can't afford it. I value not being in debt a lot! There is a lot of freedom in it. So I don't feel like taking out a loan for say Eur 15k, even if I can service some of this debt with Eur 175 / month from a car allowance.

Just to be clear - has your employer explicitly told you that you have to spend your car allowance on a car?

The message from every poster is that it's just a just non-pensionable salary. And as for Citizens Information, they have as much insight into your company policies as the rest of us.

For the record, I receive €20k/yr car allowance & have never spent it on a car... And I drive a 15 year old car that is kept together by sellotape, twine & bluetack.

 

[sm7940333]

I plan to be upfront with my employer that my financial priorities are owning my own home and then to max my pension contributions via AVCs.

Your financial objectives can be to raise a heard of unicorns for all that your company cares about. What difference should that make to them?

In saying that, you have good financial objectives. I just don't think your company cares & it's unlikely to change their perspective from my experience.

On my core salary I plan to request an upper and lower range to the grade I'm in, considering cost of living in Ireland (most of my colleagues are in UK). I have been told my salary is about middle of the band, and if nothing else getting transparency on upper and lower brackets will confirm whether this is the case.

UK is also seeing a cost of living increase. Which part of the UK are your colleagues in? London vs other regions have different salary cost of living expectations.

If I was in your position, I would be focusing my argument primarily on the value you generate for the company (vs your peers even?). If you can't justify it, maybe focused on how to exceed in the job performance to justify a future salary increase. Alternatively, you could focus your argument on the external benchmark salary ranges. But be aware of the concept of internal salary compression.

 

[Curtley-Óg]

Just to be clear - has your employer explicitly told you that you have to spend your car allowance on a car?

The message from every poster is that it's just a just non-pensionable salary. And as for Citizens Information, they have as much insight into your company policies as the rest of us.

For the record, I receive €20k/yr car allowance & have never spent it on a car... And I drive a 15 year old car that is kept together by sellotape, twine & bluetack.

@sm7940333 I have been told by HR there is a stipulation that my car would need to be less than 7 year old. I spoke yesterday to my line manager and he explained a colleague on the same team who moved from London to Dublin 7 months after being hired and left the benefit on the table as he didn't own a car in London.

That said I have not received the letter of offer that would link to my contract, which I assume you are meaning by being "told explicitly". What citiziens information explained was that if the car allowance benefit is stated to have conditions attached in my contract then I would need to abide by these conditions.

It may be relevant that UK employees in my company can avail of a scheme by which a salary sacrifice can be put tax free towards an electric car. Not available in Ireland yet but apparently its coming (0% BIK on electric cars ends end 2022 in Ireland so unless it's extended I can't see how this car scheme would work in Ireland). I dont think it's relevant to this thread other than UK employees do use their car allowance to pay their monthly pcp bill under the car scheme.

I asked HR if they could convert the car allowance to another benefit more in line with my financial needs and they answered the "Cash Allowance" is not a flexible benefit. Note the offer email clearly stated "Car Allowance". My line manager advised me not to read into this change of wording, that the same strings will be attached.

It's fantastic that you get a Eur 20k car allowance that goes nowhere near your blue-tack and sellotape reinforced car Happy for you - sounds like the dream!!

 

[Curtley-Óg]

Your financial objectives can be to raise a heard of unicorns for all that your company cares about. What difference should that make to them?

In saying that, you have good financial objectives. I just don't think your company cares & it's unlikely to change their perspective from my experience.


UK is also seeing a cost of living increase. Which part of the UK are your colleagues in? London vs other regions have different salary cost of living expectations.

If I was in your position, I would be focusing my argument primarily on the value you generate for the company (vs your peers even?). If you can't justify it, maybe focused on how to exceed in the job performance to justify a future salary increase. Alternatively, you could focus your argument on the external benchmark salary ranges. But be aware of the concept of internal salary compression.

@sm7940333 i hear you and essentially HRs response to my stating how taking on debt on a <7yo car not being financially prudent was that the "cash allowance" benefit was not flexible. (As above I'm not reading that as anything other than get a suitable car or leave the benefit).

I requested and received banding for both UK and ROI, for the grade I'm moving up to. No detail on local adjustments with each country. In ROI I imagine the upper end is for Dublin, in UK London (all else being equal). Most of my colleagues are Glasgow-based. The banding looks fair tbh. HR advise it has been benchmarked against industry and local.

Excluding car allowance I am being offered a salary 10% into the ROI band. Including car allowance the salary is 28% into the band.

Thanks very much for mentioning the concept of salary compression. I wasn't aware of it. It describes my case well - 13 years with the company in a specialist area. The team of 2 expanded to 20 in the past 2.5 years (albeit it about 7 of those are contractors). Most of the new hires are in the bracket I am moving into. My own line manager is one of them and he has openly admitted i have more experience than him, and he feels strange about managing me alongside graduates. I think my being offered a salary at best 28% into the band demonstrates salary compression, which by all accounts HR/mgnt will want to avoid from what I've read today on the topic.

I enquired of HR yesterday by email what the process is to submit an evidence-based justication why my salary should be at a specific point in the band, and what my managers need to provide in support. That I understand this is above the 10% increment limit for internal promotions, and so will need escalation to senior management.

I have stated I wish to submit justification for pensionable salary mid-band (ie 50% into band, excluding any car allowance). My managers have confirmed they'll support me with justications.

I sent the email to HR yesterday afternoon, will be next week before I learn if they'll accommodate a benchmarking process.

 

[Purple]

It's fantastic that you get a Eur 20k car allowance that goes nowhere near your blue-tack and sellotape reinforced car Happy for you - sounds like the dream!!

It can be called a car allowance of a wine gums and dickey bow allowance it's just pay.