The benefits-in-kind regime is being tightened up. From next year employerswill be obliged to calculate the value of any benefits and add them as'notional pay' to the cash element of an employees' salary, writes Laura Slattery

If you are one of those lucky/talented people whose "skills set" comprises a list of unique achievements, rare abilities and admirable personal interests so long your CV has more pages than a volume of Lord of the Rings, you may have your pick of jobs - even in an employer's market.

The small matter of pay is often a deciding factor when considering exactly which leather-bound chair you want to spend time swivelling in.

When lining up job offers you will need to be able to compare and contrast the finer details of the various remuneration packages on the table.

The "cash" part of the salary that wings its way via electronic transfer to your bank account every month is easy to assess.

It's the terms and conditions of the occupational pension scheme, the value - if any - of share options and the tax bill on benefits-in-kind such as company cars, health insurance and club subscriptions that will make things complicated.

From January 1st, PAYE and PRSI will apply to benefits-in-kind for the first time.

Up to now, the onus has been on the employee to declare any benefits-in-kind, with the Revenue reducing personal tax credits accordingly.

It is estimated that thousands of taxpayers either ignored the tax completely or did not inform Revenue of the full value of their benefits.

But from next year, employers will be required to calculate the value of any benefits and add them as "notional pay" to the cash element of an employee's monthly salary.

PAYE and the 2 per cent health levy will then be deducted, as will employee PRSI at a rate of 4 per cent on incomes beneath the PRSI ceiling of €42,160.

Crucially for job seekers currently scouring the market, employer PRSI at a rate of 10.75 per cent will also be applied to the benefits for the first time, meaning employers may be less inclined to offer them to new employees.

The effect of the changes is that employees who receive non-cash benefits as part of their remuneration will get less money in their pay packets from the New Year.

In some job sectors, new employees are already looking for higher basic salaries to compensate them for the new PRSI charge, says Ms Ciara Kenny, a manager at recruitment company Brightwater Selection.

Basic salaries for sales and marketing personnel, for example, are often lower than in other sectors, but benefits like cars, mileage, mobile phones and expenses make the pay deals sweeter.

"People are realising it's not worth the same in 2004 as it was in 2003," Ms Kenny says. "They are negotiating with employers and looking for higher basics, bearing in mind the tax implications."

The number one perk for company executives and senior managers has traditionally been the company car - a Mercedes or BMW tacked onto an employment contract is a financially-valuable status symbol.

The rising tax liability for the employer means that they may consider replacing the company car with a car allowance.

However, existing employees' employment contracts will stipulate that what they are entitled to is a company car.

"With a company car, the employer looks after all the tax and insurance, but with a car allowance the onus shifts onto the employee and they will need to sort it all out," explains Ms Mairéad Walsh, senior consultant at Mercer Human Resource Consulting.

If there is no longer any tax advantage on most job perks, employees will naturally prefer to have the flexibility of a cash payment for the value of the benefit instead.

For employers, abandoning the newly complicated paperwork of benefits-in-kind and bumping up salaries a notch or two might seem like the easy way out of an administration headache.

However, any rise in core salaries will have a knock-on effect on the company's pension promises.

Under a defined benefit scheme, the level of pension is based on the employees' final salary. There are no such guarantees under a defined contribution pension scheme, but employers usually agree to contribute a fixed percentage of employees' salaries to a pension fund. If cash pay rises, so will employers' long-term pension funding liabilities.

Not every type of perk will be affected by the BIK tax changes.

Mobile phones and personal computers kept at home but provided by an employer will be exempt from tax as long as private use is merely incidental to business use.

If an employer pays for the membership of a professional body relating to the job, no BIK charge will arise.

Other smaller items such as car parking, newspapers and magazines, Christmas and staff parties and any small benefit where the value does not exceed €100 a year, are also exempt from PAYE/PRSI.

But the only substantial benefits which will not be subject to PAYE/PRSI after January 1st are company shares or share option schemes, contributions to occupational pension schemes and travel passes, Ms Walsh points out.

She believes that shares and share option schemes will probably become more widespread as a result of the unfavourable changes to other benefits as more employers realise that shares are PRSI-free.

Job seekers should beware that any share option scheme simply offers paper wealth that can be obliterated by poor stock markets and a falling share price at any time.

New rules on the tax treatment of share option schemes introduced earlier this year mean that employees are protected from situations where the tax due on the exercise of the share options actually exceeds the value of the shares when the employee goes to sell.

But while there is potential for thrilling gains, share option schemes can wind up proving completely worthless if markets take a nasty turn.

Therefore, job seekers should view share option schemes as an added performance-related frill rather than a secure benefit that compensates for a salary that is below the industry average.