History matters

Err, no:

Job-linked benefits like health insurance rose during World War II, when inflation made employers reluctant to raise wages — so they added benefits instead. “Perks” like health care were also a way to keep workers happy so they wouldn’t leave.

The wage controls designed to curb the inflation (Hah!) meant that wages couldn’t be raised but perks could be.

14 thoughts on “History matters”

  1. Dennis, Pointing Out The Obvious

    Beyond the wage controls issue, which Anna North either ignores or is unaware of (I’ll bet on which I think it is), there’s the fact that employers didn’t “add benefits”. The benefits she’s describing are, at least in the USA, part of what is known as a defined benefit plan. Those plans were negotiated into being by labor and management, and they took hold in mature industries that had unionized labor forces. Those parts of the economy that where profitability was marginal and/or unions were not present didn’t get those benefits.

    You have to wonder if anyone working in US journalism these days actually has an education in anything other than activism. Anna North sure as shit doesn’t have one in history.

  2. In Britain wasn’t tax also a part of it? A pay rise wouldn’t be worth much after tax, but non-cash benefits were – for a while – untaxed.

    My vague impression was that paying non-cash benefits started, as Tim says, to get round the government restrictions on wages, then continued to get round high taxes, and has now mostly ended.

  3. Bloke in North Dorset

    RichardT,

    Yes, perks were tax free and a way around pay and price controls in the 70s. The company car was the classic. There were stories, apocryphal no doubt, of post boys being offered cars.

  4. Perks were (maybe even still are) tax free “except in the hands of company directors and higher paid employees”. They were progressively brought within income tax by freezing the definition of “higher paid employee” at GBP 8500 pa and not indexing it.

    Given that history, I have always had a suspicion that the last of Gordon Brown’s budgets to retain the 20% lower rate of income tax was making a treasury in-joke in choosing to set the personal allowance at GBP 4195. In the same budget the band width for the lower rate (introduced by Norman Lamont, to be replaced in Brown’s next budget by the 10% band which was, in turn, later to be abolished in Brown’s poisoned challice bequest to the unfortunate Darling) was GBP 4300 for a total of GBP 8495. It seems very unlikely that there were any practical (as opposed to political) problems from having a “higher paid employee” earn too little to be paying even standard rate tax, but the officials probably just wanted to demonstrate their professional prudence.

  5. Perks were (maybe even still are) tax free “except in the hands of company directors and higher paid employees”. They were progressively brought within income tax by freezing the definition of “higher paid employee” at GBP 8500 pa and not indexing it.

    Not just company cars, all sorts of things could be perked without payment of additional tax from private health insurance and company cars through to bottles of alcohol for your office bar (not that this sort of thing is allowed anymore). They were all gradually dragged into the tax and national insurance net with BiK (“Benefit in Kind”) taxation. This is all the stuff on your P11D form that causes the annual horror of “I’m not paying £x,xxx for that shit”. I had my private health insurance removed from my package simply because I wasn’t prepared to the annual tax demand of £650 a year due in BiK. It was probably the right move at that time, since I felt I was coughing enough tax to the NHS.

    Just to show that HM Treasury and HMRC have a sense of humour, form P9D (Expenses payments and income from which tax cannot be deducted) exists for employees earning less than £8,500 per year.

    Fiscal drag of tax thresholds has a lot to answer for.

  6. Bloke in North Dorset

    John Galt,

    Yes, you’re right, it was all BiK. I gave the company car as the example because the company car entered in to our social status conscious. It became a visible sign of where you stood in the company and even in society.

    I don’t regret the tax I paid on private health insurance, I got my severe kidney stones sorted out very quickly.

  7. Tax on company cars was once very low, based on engine size and EVERYONE did 20,000 business miles p.a. to reduce it further (ok, no they didn’t but they still ticked the box to say they had)

    That’s long gone. If it’s a new fully electric car, then yes BIK is only 1% of its OTR price but most other cars barely represent a ‘benefit’ these days, merely a cash alternative. Or worse. Had a client who thought it was a brilliant idea for his OMB company to lease a very high-end but 10 year old car. Trouble is, BIK is calculated on OTR price when new, not current MV and not the lease payments.

    Still, at least he saved on the small fee I would have charged him for advice if he’d come to me before he did anything.

  8. “form P9D…..exists for employees earning less than £8,500 per year.”

    Not since the £8,500 threshold was abolished and Form P9D withdrawn 6th April 2016.

  9. Andrew C said:
    “Tax on company cars was once very low, based on engine size and EVERYONE did 20,000 business miles p.a. to reduce it further”

    Bloke I once worked with, getting close to 5th April and way below the 20,000, drove to visit a client. In Sweden.

  10. Not since the £8,500 threshold was abolished and Form P9D withdrawn 6th April 2016.

    Ahh. The end of an era *wipes tear*

    Nowadays though I just take the cold, hard cash. Haven’t had a company car since 2001.

    🙂

  11. In the 80’s / early 90’s, there was a dispute between the tax man and BR regarding the free rail travel we enjoyed. I believe the deal was that there would be a flat rate £100 tax liability on the perk, as BR argued that as we were duty bound to report to the guard of any train we were travelling on,(including whilst on holiday) and then offer our assistance if required, we were technically ‘at work’.

  12. Bloke In North Dorset

    One benefit of company cars even after they were taxed – when mine got nicked I just walked in to HR and they gave me a set of keys and sorted the rest. Didn’t even go against me NCB.

  13. We had something similar when we got a bus pass as part of the job on the council. I always put it down as “payment in kind” on my return and took a guess at its value. After a few years it was easier as the council stopped printing their own passes and just bought standard over-the-counter passes from the transport executive. That also stopped bus drivers saying “er, wot’s that then?”

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