IS YOUR START-UP LOOKING AFTER YOU?

A vibrant team, booming social scene, a headline salary and share options galore. Boxes ticked.

Will you consider your company so highly in the event of your death or being unable to work through ill health over the long-term? If those share options are never worth anything – are your pension contributions compounding their way to your support?

This blog highlights the 3 employee benefits that don’t get discussed enough when you are negotiating your compensation from a start-up. These are the cornerstones of a good employee benefits package.

Death in service

Death in service pays out a multiple of your salary in the event of your death. Your employer is likely to pay the monthly premiums. The benefit is normally paid out to a discretionary trust and is distributed according to your expression of wishes. Make sure you complete this!

Death in service can help support your family on your death, but you should review if additional personal life insurance is needed.

Income protection

Employers should offer long-term income protection. Most will pay for your premiums, at least at a basic level.

If you are unable to work through ill health, after a set period (usually 13 or 26 weeks), income protection insurance can pay you a proportion of your salary. The insurance company will pay this income until you either return to work or the end of the agreed period.

The maximum protection you can get is 75% of your gross salary and payable until your state pension age.

Pension contributions

Following the implementation of auto-enrolment, most employees must be added to a company pension scheme. Employers must pay a minimum of 3% of qualifying earnings.

Employers that are looking after their employees will offer a much higher contribution to pensions. Share options could be worthless but a good monthly employer pension contribution can go a long way to building a savings pot to support you when you stop work. Also check out why your company should offer salary sacrifice.

My experience

I have worked with many individuals, like you, working for start-ups. Risks I’ve seen, from all sizes of company …

  • Income protection that only pays out for 2 years. A start-up tech company employing 60 individuals – most 30-40 years old. This is not enough protection against ill health.
  • Death in service 2 times salary. Start-ups cut corners
  • Multiple instances where zero national insurance saving is passed to employees through salary sacrifice.

Even the ‘best’ companies, where you expect the basics to be in place sometimes don’t have them. You should check your position thoroughly. If it would help to have a financial adviser alongside you, please contact us hello@muvado.co.uk.

This article was written by Gregory Deer at Muvado Money Limited, an appointed representative of Sense Network Limited, based on his understanding of current legislation. Dated 26th April 2023.