to think it's bonkers but also not to turn down this pay rise

[fortunatefamiliar]

Name changed as I will likely get flamed.

DH and I have a very good household income, I am not denying that. DH is in a sector which pays well and thankfully has not seen a covid-related downturn. (I'm public sector but in a good job).

He was due a payrise in April but they deferred them due to covid, very understandable. As it happens their sector has been largely unhit and so payrises are now being discussed. DH has been offered a very large payrise as during COVID he did a really big piece of work which has saved the company hundreds of thousands over the next few years (company has a multimillion pound turn over) - he came up with the idea, in his own time did a demo to show it could work and then supported his team to get it up and running. He definitely deserves the payrise.

BUT

if he takes it it, it means we will no longer be eligible for DSs 30 free hours and DD won't get hers next year when she becomes eligible. After tax, the payrise will not cover the nursery expenses of the 2 children and we will therefore be worse off.

This seems like absolute madness! But it will cost us around £30k in 3 years, and the payrise will be just shy of that over than time period (after tax).

I've suggested to DH that he counter offers for a LOWER rise, which will put him just below the threshold for the free hours. This is still a good rise.

The alternative is to ask for a rise that will cover the loss of the 30 free hours, but this is quite a bit more, taking in to consideration tax.

It seems like a totally bonkers situation to be in (5 years ago we were scraping money together to pay the bills!) but can anyone else an issue with rejecting a payrise?

Incidentally, all those giant corporates who don’t pay tax in this country? All those arrangements are within the letter of the law. They are simply exploring systems to ensure that they derive the utmost benefit from them. But I don’t think anyone would agree that is morally acceptable. What is the cut off point?

Is the 15 hours universal then? I assumed it was all one thing.

Why can't we afford childcare? (costs rounded)

We can currently afford our chilcare costs - £14k per year.

If DH takes the payrise, our childcare costs go up to £28k, his payrise, after tax would be £20k. We would be £8k worse off. We could still afford the childcare, but it would significantly impact our household finances overall.

"Why can’t you afford childcare with a100k+ income?"

Where does the OP say they couldn't?

It is however entirely reasonable to baulk at the idea of a payrise leaving you worse off.

It would be unwise to turn down the pay rise, as further rises will presumably follow from where his salary is at that future point.
So, if he's been offered a £5000 rise now, but only takes £3000, that won't be remembered in the future. His employers won't offer him £4000 instead of £2000 in 2025, to make up for that time in 2020 when he didn't accept as much as he could have.

Basically, your maths is flawed because you're looking at this too short term. He needs to accept in full and you need to look at the advice above regarding redistribution.

You're not the middle and it shows how out of touch you are that you think you are. Less than 5% of people earn more than £80k a year.

The 15 hours is universal, so regardless of salary can use the hours

(My numbers were purely illustrative.)

You need to look into it properly op. Yes the 15 hours is universal, once they reach a certain age (3 I think) but check any requirements. The extra 30 hours is dependent on you both working and neither earning over 100k (although you could both earn 99k)!

There is a bit of an annoying couple of years whilst you are stuck at the 100-115ish income from one person.

Do you get childcare vouchers or the 20% childcare thing?

I think take the pay rise, hopefully more pay rises are coming down the track and in three years you’ll be over that sticky spot where you lose tax free allowance etc and seem to worse off despite earning more and more.... it does pay off in the end. Could you cut your hours for a couple of years so you only need 15 hours, or at least you don’t quite need the full 30, then go back FT later?

I mean "extra 15 hours" to make a total of 30!

@fortunatefamiliar

Is the 15 hours universal then? I assumed it was all one thing.

Why can't we afford childcare? (costs rounded)

We can currently afford our chilcare costs - £14k per year.

If DH takes the payrise, our childcare costs go up to £28k, his payrise, after tax would be £20k. We would be £8k worse off. We could still afford the childcare, but it would significantly impact our household finances overall.

I don't think your maths is right? You would pay £14k extra and he'd get £20k so you'd still be £6k better off.

Don't take the pay rise. It makes financial sense not to.

Possibly they could reward him in ways that don't impact on your ability to claim funds - a new car or similar?

@fortunatefamiliar

Hercwasonaroll 2 kids, full time nursery is £14k per year WITH the free hours. It'll be double without them.

Get a nanny it would be cheaper 🙄

I think rejecting a pay rise or negotiating a lower one looks very odd and could seem like he isn't ambitious or committed.

As seen on this thread, it does raise moral questions about access to government support as a high earner. I do see that, but I also dont see people on 50k handing back child benefit if they can do without it.

If you salary sacrifice into his pension any amount over 99k he will remain eligible for the 30 free hours

Hardbackwriter

currently, we both earn less than 80k per year (our household income is only marginally more than that). This payrise will take him over that though.

Why is no one happy here unless people are piss poor and trying to find ways to improve their financial situation?

OP if I was him I would accept it and up pension contribution.

To net £100000 you need to earn £170000ish gross. That puts him in the top 1per cent of earners.

Squeezed middle is widely thought to be 60-100k gross household income.

I think you need to reframe your thinking.

But it won't be £30k over 3 years, because one kid will be off to school. The 15 hours is universal too.

Are you using tax free childcare?

Do his earnings have the potential to rise again?

You aren't really in squeezed middle territory here tbh.

You get the 30 hours when your child is 3 and you live in England, right? So your eldest child will be in school in somewhere between one year and 18 months? Halving your childcare bill?

Plus £14k childcare with 30 free hours is INSANE. Where do they go?!

Op are you talking about your combined incomes going over the 100k threshold or just his? Your figures aren't making sense to me.

Take the rise, put the excess into his pension for three years.

@fortunatefamiliar

Is the 15 hours universal then? I assumed it was all one thing.

Why can't we afford childcare? (costs rounded)

We can currently afford our chilcare costs - £14k per year.

If DH takes the payrise, our childcare costs go up to £28k, his payrise, after tax would be £20k. We would be £8k worse off. We could still afford the childcare, but it would significantly impact our household finances overall.

Although this doesn't make sense - you said about his net increase would be

I will talk to him about his pension. I don't know if it is salary sacrifice. It is PLC, unsure if they would give shares, another thing to consider.

Will also redo maths re universal 15 hours.

Thanks for your help.

And yes, I am not saying we are hard up. We aren't. I'm saying it's bonkers to be worse off after a payrise. My sister had a similar issue on the opposite en, her payrise would have taken her over the benefits threshold but left her worse off overall so she rejected it but negotiated 3 days extra annual leave which I think was a good solution, unfortunately that option isn't open to DH.

But it will cost us around £30k in 3 years, and the payrise will be just shy of that over than time period (after tax)

You won't be worse off, his company will be paying the childcare rather than the taxpayer.

That seems like a good option to me.