Lump Sum or Payrise?

Hi,

My BF working in manfacturing (tool making) and is in a managerial position. He has not had a pay increase for over 4 years. Not even a cost of living increase - nothing.

This company don't have a HR dept or a salary structure in place and no union either. He's worked for this company since leaving school and is very good mates with the MD.

He has spoken to the MD this morning about it and the MD suggested that instead of him getting a payrise (an extra €10 p.h.) that he give him a lump sum of €10K. That way they both benefit - as in the tax man doesn't get half of it.

What do you think of this? Should he accept it and be grateful.

Opinion and ideas please -

Thanks for your help in advance.

Re: Lump Sum or Payrise????

The taxman is entitled to his cut, regardless of how it is paid. If you BF's employer does not pay over the tax on this he is breaking the law. If your BF knows this and factilitates it, he is breaking the law too.

On top of this you have the fact that an under-the-counter payment won't be counted towards any prsi/pension entitlements, loan applications etc.

Suse said:

the MD suggested that instead of him getting a payrise (an extra €10 p.h.) that he give him a lump sum of €10K. That way they both benefit - as in the tax man doesn't get half of it.

What do you think of this?

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It's a stupid and illegal idea if the plan is to pay this under the table as cash and evade tax and employer/employee PRSI on it. The employer really should know better than to suggest this. See this similar thread:

Cash in Hand ?

Good advice so far.
What part of the country is he in? There is a huge demand for good Toolmakers so he should have little problem getting another job. If he's on less than 60k a year he's being badly paid.

Purple - there is very very limited work for tool makers in a manfacturing envoirnment as the majority of this work has moved to china/asia in the last 12/18 months.

I think he will insist on the payrise and not the lump sum, it would seem the better option!

And as for €60K - he (and I) wishes !!!!

Thanks for all the advise!

I'm a toolmaker and employ toolmakers and we can't get them. Either can our main competitors. There is a huge shortage of skilled manual workers in this country, especially if they have CAD, ISO, project management and front line management experience. We place ads in local papers in Poland and Estonia and have taken on guys from China and India, as well as Eastern Europe to try to fill the skills shortage. The same applied to companies I know in Galway and Waterford.

Interesting - he works for a large company in Galway and the majority of their projects are being allocated to their other factories in Czech, China, Germany and Phillipines. Quite a few of their more in-experienced tool makers have been let go over the last few months and replaced by unskilled workers.

Anyway the point being I think he should go for the payrise and not the lump sum as he is hardly going to get a lump sum annually, espically has his wages have not been reviewed for 4 years !!!!!!!!!!!!!!

If I read it right take a 10k payment in cash (somehow) or take a €10 per hour increase. I would take the €10 p.h. increase for all the right reasons.
1. You have to pay tax on either sum.
2. The p.h. increase gets taken into account for holiday pay, pension, sick pay, company insurence, etc.
3. When he gets an other per hour pay rise it is compound on this one.
4. In the event of a redundancy the higher the rate of pay the better
5. I don't know if he get overtime and if yes then the €10 p.h. is again a better option.

It is very unusual for a toolmaker not to get overtime.
The lump sum is a once off payment and so will have to be negotiated each year.
It is also illegal for his employer to make this sort of off the books payment and should tell you a lot about how they run their business.

Purple, of course you are right about a toolmaker getting o/t. however it does say that BF is in a managerial position, and it is not always the case that a manager will be paid o/t. The offer of an extra €10 p.h. leads me to think he gets o/t.
€10 p.h is a €20,280 p.a. pay increase, I would "bag it" and move on...

Martinslan said:

Purple, of course you are right about a toolmaker getting o/t. however it does say that BF is in a managerial position, and it is not always the case that a manager will be paid o/t.

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Good point