Salary negotiation: ask for lower base and higher employer pension contribution

Current Scenario: Offer of 120k & 10% pension contribution.
Should I ask for 110k and a 20% pension contribution?

Logic being is its net beneficial to me and pari passu to the employer

You can always try if that's what you want. From my experience, most places in Ireland don't negotiate on benefits but only salary. If it's a large company, it might be hard to change from the standard ones. I negotiated for an extra 7 days holidays, something they never been asked funnily enough. Got there in the end but had to go through their legal team and took an extra week to get the contract.

Assuming your pension needs more funds and you are planning to max out your contribution I would say yes go for it.

If that amount plus your max will not get your pension where you want it then I'd even go for a higher percentage. Personally I'd probably look for my salary to cover my costs and put all the rest in pension! Would be very tax efficient.

I think it works out slightly cheaper for your employer? I thought there was some employer tax not paid on the pension contribution part. You would need to verify though.

I guess in the future you could renegotiate back to the standard 10% pension.

Please let us know how you get on

So I didn't get the job !! Sorry folks

Drat! Next time....

Did they seem open to negotiation?

We do this a lot for clients.

You need to get HR onside or it’s a non-starter but it’s our default for C suite roles and is great when combined with a 100%electric company car -no BIK

Does it make more sense (subject to employer approval) to have the employer contribute e.g. €1,000 per month into a pension as an Employer contribution or for an employee to get an additional €1,000 in salary and make an employee contribution of €1,000 (and receive the 40% tax relief).

Employer contribution is considerably more tax effficient

employer pays PRSI on salary at about 10% this isn’t the case on a pension contribution

Employee pays USC and PRSI on salary again not the case on employer pension contributions so employee tax relief at up to 52%

Whereas if salary paid, the employer out of pocket PRSI and the employee only gets 40% tax relief on AVCs and still has to pay the USC and PRSI even when pension contribution is made as these are not relieved on employee pension contributions but they are for employer

so “salary” results in 22% more tax approximately than employer pension contributions at the top end

as set out in the guide, the thing to watch out for here is Revenue’s view of salary sacrifice arrangements.

you can’t just decide one day to change your salary and have your employer direct it to a pension because it will save you some tax - funny, but revenue take a dim view of that

as I say, revenue seem to think that the rate of tax in Ireland for employees is 100% and they give us some living expenses

Marc said:

Employer contribution is considerably more tax effficient

employer pays PRSI on salary at about 10% this isn’t the case on a pension contribution

Employee pays USC and PRSI on salary again not the case on employer pension contributions so employee tax relief at up to 52%

Whereas if salary paid, the employer out of pocket PRSI and the employee only gets 40% tax relief still has to pay the USC and PRSI even when pension contribution is made as these are no relieved on employee pension contributions but they are for employer

so “salary” results in 22% more tax approximately than employer pension contributions at the top end

as set out in the guide, the thing to watch out for here is Revenue’s view of salary sacrifice arrangements.

Click to expand...

Thanks Marc, that makes sense

As others have said, if you are trying to maximise your pension contributions, there are advantages to having this done via employer contributions rather than member contributions. Firstly, there is is saving in PRSI (both employer and employee) and USC. Secondly, company contributions don‘t count towards the limit on tax relieved contributions, so this increases the overall amount that can be contributed.

Having said this, Revenue don’t allow “salary sacrifice” i.e. giving up part of your salary in exchange for a higher company pension contribution. So you would need to negotiate it upfront if joining a new employer. It may also be possible to forgo a salary increase in return for an increased company contribution, although Revenue might look into this if you are in a large DC scheme where everyone has the same employer contribution rate.

Does this make sense?