SALARY/PAYSLIP BREAKDOWN

Understand Your Salary/Payslip Breakdown

Many people do not understand how their pay slip/wage slip/salary advice is made up, and most people only know what they take home through their bank balance.

You need to know the difference between your Total Cost to Company, your Basic/Cash component and your Nett as well as the Gross salary. These are all different from each other and can't be confused as the same thing when referring to 2 of these mentioned together.

Before accepting an offer of employment, you need to be informed and fully understand what your monetary breakdown is so that you do not make a loss, even if you are unaware of making a loss when you move. Some benefits are not cash benefits and are benefits directly paid by the company. Money which you never see, nevertheless, it is money paid on your behalf, that you do not pay directly yourself, therefore it becomes a benefit to you. You can get cash and non-cash benefits. For example - a housing allowance given to you as a monetary value each month is a cash benefit and would usually reflect on your payslip. However, if given company housing, this is a non-cash benefit as the company pays for that housing and this won't be reflected on your payslip as it is not something the company is paying to you in cash. Under the 'deductions' section of your payslip, there may be deductions for water and electricity, but this has nothing to do with this benefits and is not part of your cost to company.

Basic Salary:

Your 'Basic Salary' or ' Cash component' is the salary amount paid to you before you get any additional benefits from the employer such as medical aid, pension, and various allowances which are added in over and above this amount. So, your basic salary is the part of your salary that is a fixed amount every month. This amount does not include overtime pay and any bonuses or 13th cheques etc.

Cost To Company:

These is your total earnings. This term is used to calculate the total cost to the company to employ you. i.e. all the costs the company has to make associated with your employment contract. The cost to company has nothing to do with your deductions. If your employer offers medical aid and your MA benefit each month is R 2000 where they pay 60% of this, and you contribute 40% of this figure, then the R 1200 (60% of R 2000) paid by the employer will be part of the cost to company and has nothing to do with the R 800 (40% of R2000) that is your deduction/contribution as well.

Cost to Company could include the following:

  • Gross salary
  • All cash benefits like Medical Aid, Pension/Provident, car allowance, car insurance, market allowance, cell allowance etc etc
  • 13th Cheque and Bonuses
  • Use of company property such as car, petrol card, computer/notebook, software etc.
  • Cost of any loans, bursaries and interest free or low interest loans
  • Cost of any expenses paid on your behalf such as insurance & telephone at home etc.
  • Costs of share options & incentive schemes etc.
  • On Target Earnings (OTE) - This is a form of salary that may variable in nature. This salary structure is usually paid in sales-related jobs where one would usually get a basic salary and then a commission portion over and above the basic should one reach their targets; this is referred to as OTE. So the company pays a basic salary and then pays commission on sales one generates for the company. The commission generally kicks in only once you have made a predetermined sales target. There are various ways that the commission is calculated and almost every company has its own commission structures.

Net Salary:

Your 'Nett Salary' is what is left of your salary after all deductions have been made as well as for PAYE (Pay as your earn - in S.A) (tax), UIF (Unemployment Insurance Fund - in S.A) etc. This is also the amount that is paid into your bank account on a monthly basis. In certain cases, you may have other deductions if you have taken out a loan or bond re-payments and these may be deducted after the nett salary is calculated. So the salary paid into your bank account would be your nett salary less these repayments. Nett salary is also referred to as “take home pay” – the money in your pocket at the end of the month.

In some strange cases, one may see a figure on their payslip that says 'Total Package' but it is not logical figure when one adds up everything one would think contribute to a 'Total Package' they see on their payslip. One company for example labels the candidate's 'Total Package' as the following: Basic salary plus Pension, plus Medical Aid plus Housing Allowance even though there are other benefits that are offered as well.

One thing to note is that not all payslips/ salary slips are the same and not every company understands these components to be defined like we have defined them as mentioned above. Where you are unsure of your earnings, go to HR and ask them to give you a clear breakdown of your contributions and the company's contributions.

It is vitally important to really understand what you are earning is detail before being interviewed for a job position. You may get a salary increase that looks pretty good, only to figure out later that you are travelling further distances and your increase in essence is something you are now paying as your own overhead in petrol. You must always ask for a dummy payslip if given an offer to understand the total breakdown of the salary on offer and see what you are going to be netting as when all is said and done, this is the most important piece of information to base your decision on when specifically comparing apples with apples.

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