Pls help urg.Salary package Is car allowance a benefit or a a part of basic salary ?

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Pls help urg.Salary package Is car allowance a benefit or a a part of basic salary ?


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Old 10th June 2011, 08:38 PM
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Question Pls help urg.Salary package Is car allowance a benefit or a a part of basic salary ?

Dear all,

I am moving to UK for work. It is an iternal transfer. The offered salary package is X basic + car allowance + bonus.

the offered basic salary is less then my current salary. per my understanding car allowance is a benefit and not a part of basic salary. We do have this in Germany as well and it will be paid only once at the beginning. However HR guy mentiooned that car allowance in UK is a part of salary and my salary will be : basic salary X + car allowance.
My quaestions is the car allowance a prat of salary or an extra/special benefits ?
How about pension in UK ? If it is not mentioned then I have to discuss it as well , I mean is it an extra ?
How about Medical insurrance ?
Is it usual that company set a probation period for new contract after internal transfer, although the first probation period was passed.

Please help me. I need to decide very quickly during the weekend about it . I am a bit lost right now....

Thanks a lot in advance !

With best regards, lily

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Old 11th June 2011, 03:40 AM
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Originally Posted by summerlily View Post
Dear all,

I am moving to UK for work. It is an iternal transfer. The offered salary package is X basic + car allowance + bonus.

the offered basic salary is less then my current salary. per my understanding car allowance is a benefit and not a part of basic salary. We do have this in Germany as well and it will be paid only once at the beginning. However HR guy mentiooned that car allowance in UK is a part of salary and my salary will be : basic salary X + car allowance.
My quaestions is the car allowance a prat of salary or an extra/special benefits ?
How about pension in UK ? If it is not mentioned then I have to discuss it as well , I mean is it an extra ?
How about Medical insurrance ?
Is it usual that company set a probation period for new contract after internal transfer, although the first probation period was passed.

Please help me. I need to decide very quickly during the weekend about it . I am a bit lost right now....
Not knowing what exactly you are offered, it's hard to be precise, but

a) Car allowance. There are various ways this is offered. Some give you a company car - bought and insured by your company, but usally you can choose from a limited range. This is getting less popular because tax regime can make it an expensive option for them and for you, as you are taxed as a benefit in kind, esp if you get free fuel. Or they can give you car allowance as a cash sum, so part of your salary. You buy and run your own car, and use that to subsidise your cost. You will be taxed and pay national insurance on it - usually extra 11%.

b) Pension. This varies too. If you are eligible to join the company pension scheme, it should be offered - it's not compulsory. If you join, they will deduct monthly contribution from your before-tax pay. Company pension usually makes financial sense, though most schemes are now defined contribution (money purchase) type and depends on investment performance for your return. Very few companies now offer (expensive to them) defined benefit (final salary) scheme, which is still available to most in public sector. You need professional advice, esp if you hope to get pension from Germany as well as UK.

c) Medical insurance. As everyone qualifies for free National Health Service, private medical insurance is an optional extra. Useful to have, as you can be treated when you want and where and by whom. You will be taxed on this benefit.
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Old 11th June 2011, 09:29 AM
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Not knowing what exactly you are offered, it's hard to be precise, but

a) Car allowance. There are various ways this is offered. Some give you a company car - bought and insured by your company, but usally you can choose from a limited range. This is getting less popular because tax regime can make it an expensive option for them and for you, as you are taxed as a benefit in kind, esp if you get free fuel. Or they can give you car allowance as a cash sum, so part of your salary. You buy and run your own car, and use that to subsidise your cost. You will be taxed and pay national insurance on it - usually extra 11%.

b) Pension. This varies too. If you are eligible to join the company pension scheme, it should be offered - it's not compulsory. If you join, they will deduct monthly contribution from your before-tax pay. Company pension usually makes financial sense, though most schemes are now defined contribution (money purchase) type and depends on investment performance for your return. Very few companies now offer (expensive to them) defined benefit (final salary) scheme, which is still available to most in public sector. You need professional advice, esp if you hope to get pension from Germany as well as UK.

c) Medical insurance. As everyone qualifies for free National Health Service, private medical insurance is an optional extra. Useful to have, as you can be treated when you want and where and by whom. You will be taxed on this benefit.


Hi Joppa,

Thanks a lot for your reply :-)

(*) Car allaowance: It is an internal transfer to UK. So my basic salary in Germany is more than the new basic salary in UK. As I discussed this the HR guy mentioned that car allowanc is a part of my yearly salary. In Germany the company pay only the car allowance once at the beginning of the contract. this is also what most companies do in Germany. therefore a car allowance in Germany is an extra benefit. However I was informed that a car allaowance in UK is a a part of my yearly salary. Do you know if it will be paid every year or only one time ? I am not going to get buy car at the moment. Is this a company policies in UK to keep basic salaries in UK low ?

(*) Pension : It was not mentioned in package. do you have a public pension in UK ? The employee will pay a percentage and also the employer to public pension fond? do I have to do a private pension in UK ?

Many thanks for your help in advance :-)

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Old 11th June 2011, 10:00 AM
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Hi Joppa,

Thanks a lot for your reply :-)

(*) Car allowance: It is an internal transfer to UK. So my basic salary in Germany is more than the new basic salary in UK. As I discussed this the HR guy mentioned that car allowance is a part of my yearly salary. In Germany the company pay only the car allowance once at the beginning of the contract. this is also what most companies do in Germany. therefore a car allowance in Germany is an extra benefit. However I was informed that a car allaowance in UK is a a part of my yearly salary. Do you know if it will be paid every year or only one time ? I am not going to get buy car at the moment. Is this a company policies in UK to keep basic salaries in UK low ?
If you get a lump sum called car allowance, and not a company car, you should get it monthly as part of your salary.

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(*) Pension : It was not mentioned in package. do you have a public pension in UK ? The employee will pay a percentage and also the employer to public pension fond? do I have to do a private pension in UK ?
You will have to contribute to National Insurance as percentage of your pay, which will earn entitlement towards state retirement pension plus some others. Your employer pays too. This is compulsory. If your company doesn't offer own pension plan (though UK-based company, even if it's a foreign subsidiary, will soon have to offer one by law or facilitate staff to join a new state scheme), you can contribute to a private pension. Whether it makes financial sense depends on individual circumstances, so talk it over with financial advisor.

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Old 11th May 2012, 08:12 AM
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car allowance is usually paid monthly.
If you have a salary of Y and a car allowance of X, your monthly pay packet SHOULD be comprised of:
Y/12 & X/12
Both are taxed as if they are income.

In tax terms, a salary of £30,000 with car allowance of £5,000 is EXACTLY the same as a salary of £35,000 with no car allowance.

they may do it differently, of course, and choose to give you the car allowance annually up front. It is still taxed, though.

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