An essential element of every CAREEROSPHERE talk is giving viewers an idea of what they could realistically earn in a given career by showing current salary levels in that area. There are other benefits that employers provide to reward and retain staff however, and they come under the general heading of non-salary benefits, sometimes referred to as perks. Two of the most important non-salary benefits are Maternity Benefits and an Occupational Pension Scheme.
Ok, first of all, I know, I KNOW, you couldn’t care less about these as a teenager! BUT, the time will come when they will be important to you. Don’t worry if you don’t understand the details of them, all you really need to know is:
a) It’s better to have them than not
b) Certain employers are far more likely to provide these benefits than others
In each talk, we identify the areas within a career where employees are likely or unlikely to receive these benefits.
In Ireland, a female employee is legally entitled to take 26 weeks (6 months) leave from work when she has a baby, with the option of extending it for a further 16 weeks. Usually, the mother will start maternity leave two weeks before the baby is due. There is no legal requirement for an employer to pay the employee while she is on maternity leave, the only obligation on the employer is to allow her to take that time off and keep her job open for her to return to.
Maternity Benefit refers to the pay that an employer provides while the woman is on maternity leave. If a firm does not provide maternity benefit, she will have to rely on the State Maternity Benefit, assuming she is eligible for it (in general, if a woman has been in employment in Ireland for at least 9 months beforehand, she will be eligible). The State Maternity Benefit is paid by the Department of Social Protection and the current rate is €230 per week.
On the other hand, some employers provide full pay for the first six month period – well, typically what they do is pay the employee her usually salary less the State Maternity Benefit, so that between the two she is receiving her full salary.
Take the example of a female employee earning €60,000 per annum with standard tax credits. Her after-tax salary is €41,067 and so her weekly after-tax salary is €790. If her employer provides full maternity pay less State Maternity Benefit, she will continue to receive €790 per week for the first six months, while an employee working for an employer that does not provide Maternity Benefits would only receive €230 per week. It’s a big difference and is obviously a factor for females deciding where to work for the years in which they are hoping to have a baby.
Some employers will offer benefits that are somewhere in the middle, e.g. 50% or 75% of salary for the six months. I’m not aware of any employers who continue to pay employees who avail of the additional 16 weeks leave. It is common for Employers to specify that female employees will not be eligible to receive these benefits for a period after they start work with the firm, e.g. two years.
Employers usually provide details regarding Maternity Benefits in the Contract of Employment.
I started a pension at the age of 31 when I started working with a company that advised pension funds, it seemed like an appropriate time! Over the course of my time in that job, I began to really appreciate how important they are.
A pension refers to a regular payment that a person receives once they reach retirement age.
The State Pension refers to a payment made by the government to eligible individuals once they reach a certain age. The maximum payment is currently €233 per week and at present, this is payable from the time a person turns 66. From 2028, it will be payable from age 68.
An Occupational Pension Scheme refers to a savings fund that both an employer and employee contribute to while the employee is in employment with that firm, in order to provide a pension for the employee in retirement.
A Personal Pension refers to a savings fund that an individual contributes to, in order to provide a pension for themselves in retirement. Self-employed individuals, such as Barristers, set up personal pensions because there is no employer to provide an occupational scheme for them.
For a lot of people in their 20’s, whether or not they are contributing to a pension will depend on whether or not their employer provides one. Individuals can go and start a personal pension outside of work, but in my experience most people in their 20’s are unlikely to do this.
Why do you want an employer that provides a pension scheme?
For many people, €233 per week is not enough to live on comfortably. An occupational pension (or a personal pension) will provide an additional source of income in retirement.
Why a pension scheme? Why not just try and save money in a bank account?
Two reasons - tax benefits and investment growth.
The government wants to encourage people to build up a private pension (a private pension means either an occupational pension or a personal pension) so they incentivise this by giving tax relief on contributions. I won’t go into the detail but basically an employee making pension contributions pays less tax than they would have otherwise.
The contributions are invested in stocks, bonds, property, and other types of investment assets. Over long time horizons, these investments have performed strongly and the idea is that your money will grow at a higher rate than it would in a bank account.
How does a pension scheme help?
A typical arrangement at the moment would be for a business to operate what’s known as a Defined Contribution pension scheme. It works as follows:
· I will contribute x % of my salary to my pension fund each month
· My employer will contribute y % of my salary to my pension fund each month
· That money is invested in investments (usually the employee can choose the investments)
· The intention is that money will grow over time as the investments hopefully increase in value and further contributions are added to the fund by both employee and employer
· The employee cannot access the fund until a certain age, e.g. 65 (exact age will depend on the rules of that particular pension scheme). This is because the pension scheme benefits from certain tax advantages, and the Revenue Commissioners only grant these advantages on the condition that the money within the fund cannot be accessed until retirement age.
· At retirement age, the fund is used to provide an income for the person in retirement
So for example, the employer might contribute 5% of my salary if I contribute 5% of my salary. For a salary of €40,000, I would contribute €2,000 to my pension fund and they would pay an (additional) €2,000 to my pension fund. So instead of receiving €40,000 salary, I will now be paid €38,000 but €4,000 will be paid into my pension fund (€42,000 in total).