Seven Tax-Efficient Perks to ask your Employer For

By Nora Dunn on 9 December 2007 (Updated 13 December 2007) 9 comments
Photo: dusdin

The day and age of employer/employee loyalty is long gone. No longer do people finish school, and work their entire career at the same company, retiring with full pension and benefits for life.

In fact, the average person will not only change employers, but careers entirely approximately eight times before reaching age 50. Combine that information with layoffs and downsizing on the employer side, and “tenure” becomes a thing of the past.

As competent and dedicated employees, you can use this to your advantage though. If you are doing a good job, your employer will want to keep you. And to do so, they know they might need to woo you or otherwise entice you to stay if your skills are marketable and you are in demand.

Here is a list of things you can try asking your employer for, either at the negotiation table before you take a new job, or at an annual review when you have demonstrated that you are an excellent employee:

Raise

This is of course the tried and true way of being compensated and appreciated for your services. Unfortunately though, it’s also the hardest to get and the worst for your taxes. The higher your income, the more tax you pay, and sometimes a small raise to the next tax bracket can even mean less take-home pay than before. Following are a few other suggestions that may carry more bang for your buck.

Pay for Education

It is in your employer’s best interest to have educated employees who are seeking further knowledge in their profession. Education can take the form of on-line courses, part-time university or college credits, or professional courses. Professional certificates in your line of work can not only mean more marketable skills, but higher pay. So you may end up getting that raise after they pay for your education anyway.

The beauty of getting your employer to pay for courses is that the cost of the course is deductible to your employer, and rarely shows up on your pay stub as a taxable benefit. It’s like free money (as long as you are willing to put in the work of studying).

Enhanced Benefits

Another way to get more value out of your job is to ask for an enhanced benefit program. Maybe this will look like a lower deductible on your health care claims, or a better split in premiums if you pay part. Maybe they will enhance your Disability Insurance plan (but beware of the tax consequences of them paying for it entirely).

Toys

If you have a work place with flex hours or the ability to work from home, you can ask for toys to help you do your job when you’re not in the office. These toys can take the form of a cell phone or PDA (with a fully-funded plan of course), laptop, internet service at home, or any other relevant services you can legitimately use for work but that might also enhance your personal life. And because it is the cost of doing business, rarely if ever will you be taxed for it.

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Car Allowance

Some employers will dole out car or gas allowances for their employees. It could come in the form of additional pay, but often takes the form of a company credit card or reimbursement plan. If it is the latter, it again usually allows you to avoid additional taxation as it’s considered a company expense not an employee-related expense.

Better Pension/Retirement Benefits

You can request a matching program (if you contribute “x” percent or dollars, then they will match it in totality or up to “y”), or you can ask simply for better employer-funded coverage of your retirement or pension plan if such a company plan already exists.

Contract Employment

This is a sticky area, and should be approached with caution. However if you have a good relationship with your employer and they want to keep you, you could consider being taken off the payroll as a salaried employee and added instead as a contract employee. Technically this means you are self-employed, and can now deduct any expenses that you personally incur to earn your income. This includes transportation (car, gas, repairs, public transportation), home office supplies and equipment, and a myriad of other miscellaneous items depending on your line of work.

The down side to this is that if down the road the company needs to lay off employees, you will be the most expendable since they don’t have to give you severance pay, or when the contract is up they can let you go with little or no notice, depending on the terms.

Consult your accountant or tax-preparer before going down this road, but if it is done properly it can save you lots of dough in taxes and be quite lucrative.

And, if your employer is unwilling to budge, or you are looking for a new career and want to go where the money is, here is a link to the Top Ten List of Majors With The Highest Salaries.

Employers aren’t stupid. If you don’t ask for (or demand) extra perks, then rarely will they volunteer them to you. Just like asking for a discount, the worst they can say is “no”. You’ll never know unless you ask!

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Guest's picture

"sometimes a small raise to the next tax bracket can even mean less take-home pay than before."

How so? Say your salary increases, and 1k of your new salary ends up being in a higher tax bracket. Not all your income is taxed in the new bracket, just that 1k. Or am I missing something?

Will Chen's picture

FlatGreg, what you say is true.  However, once you move up the tax bracket, I believe you begin to lose different deductions.

Julie Rains's picture

These are great ideas -- you could also use them in initial salary negotiations and when something may be changing about your job (perhaps your boss wants you to relocate and you can get some extra perks to make the transition go more smoothly).

I am typically in the "more money is better" camp but I like Nora's mention that you may need to consider ramifications. For instance, I once advocated for an employee to get full-time status; what I (and she) didn't realize was that she was living in government-subsidized housing (across from the area community college) and her rent bill went from something like $25 to $400 (I don't remember the exact number but do remember thinking, did you not know that $25 wasn't a standard market rate -- these were fairly nice apartments). She was from a rural area and didn't really have any comparisons; to boot, she had been sending money to her parents, which abruptly ended. So, her status improved but her cash flow suffered.

 

Guest's picture
Guest

Percentage raises compound over time. I would never turn down an increase, even if I lost ground temporarily. It will be worth it in the long run.

Unless they let me go because I make too much...

Guest's picture
Guest

Your income is taxed at the margin, or each bracket is calculated separately so only your marginal income above your current rate is calculated at the new rate so you don't lose money per se by going into a new bracket.

There are some deduction rules but it has to do more with what is your TAXABLE income rather than just overall gross. If you have qualifying retirement accounts, 125 plans, etc., and you increase the pre-tax deductions, your TAXABLE income may actually be less than your pre-raise income.

Guest's picture
Guest

Depending on your retirement plan, it also pays to have a higher income. For PERS/STRS (public) retirement systems in CA, your retirement income is calculated based on your highest paid income over the last 18 months, 3 years, or whatever it is based on. Therefore, having a higher income now translates into having more money paid out in retirement.

Guest's picture
Minimum Wage

My employer doesn't believe in perks.

Guest's picture
Guest

my friend's parents (he's a business owner...shes a CPA and a CFO of a big corporation) figured out that he would actually bring home more money if he made 60k than if he made 80k a year.

Mark P. Cussen's picture

So how do I get an article published on MSN's home page? I'm jealous again! But congratulations on your post. You have repeatedly earned and re-earned my respect!

 Mark P. Cussen, CFP, CMFC