Accepting a new job offer can be exciting. You're ready for the career jump and your salary will be higher. However, when you receive your payslip, you realise that your nett income is lower than in your previous job.
Before accepting a job offer, it's vital that you understand your payslip to ensure that you know where your money is going.
Be aware that companies operate differently. Some work on Cost to Company (CTC), while others work on Total Cost to Company (TCTC).
There is an alarming number of professionals who know what their nett income per month is but don't know what their annual package amounts to.
It is important to understand that the benefits offered by a prospective employer have a direct impact on your nett income. So, it's vital to establish what allowances and benefit/ additional benefits your new package includes. "It is important for a specialist recruiter to explain to the candidate that a benefit includes what the company and/ or employee contributes (i.e. medical aid, provident fund). And an allowance is money in your pocket (i.e. travel allowance, cell phone allowance) – added to your basic salary", says Network Recruitment's Training Manager, Somande Brown.
What is the difference?
Refers to the total cost that an organisation is spending on an employee, including your monthly CTC (basic salary plus allowances and company contribution) and a guaranteed 13th cheque.
Refers to your monthly CTC plus the full cost of all of the additional benefits, your bonuses and a 13th cheque (not guaranteed).
Deductions – Payslip Terminologies
Payslips differ from one company to another. However, it's worth familiarising yourself with these payslip terminologies.
• Pay as you earn (PAYE):
This is a tax payment method where an employer is required by law to deduct income tax every month (and national insurance, if applicable) from an employee's salary.
• Unemployment Insurance Fund (UIF):
This is a government created fund used to assist professionals who have lost their jobs. Money is contributed to the fund as an automatic salary deduction by any professional who works more than 24 hours a month. Both the employer and employee contribute and money is available to you if you are fired, retrenched or are on maternity leave.
A fund that both the employer and the employee pay money into regularly. Upon retirement, the member is entitled to receive 1/3 of the total benefit as a cash lump sum payment and the remaining 2/3 is paid out in the form of a pension over the rest of the member's life.
• Provident Fund:
Similar to a pension fund, in that both the employer and the employee make regular contributions. "With a provident fund the member can either receive the full benefit paid in a cash lump sum or in instalments," adds Brown.
• Garnishee order:
A garnishee order is a drastic measure for collecting a debt. This is a court order instructing your employer to pay your credit providers before your salary is paid to you. This means that your credit provider will be paid first and your take-home salary will be reduced.
• Group Life:
This a life assurance scheme activated by an employer for his or her employees. The employer may decide to run it alongside an occupational pension scheme or as a stand-alone scheme. In the event that you pass away, a tax-free pay-out equal to a maximum of four times the qualifying salary (your final remuneration) will be paid to your spouse/ dependants.
• Sign-on Bonus:
Money paid to a new employee by an employer as an enticement to join a company. This usually happens when a person has a scarce skill and has a clause that binds the recipient for a year of service.
Payslips can get quite complicated. It's the specialist recruiter's job to explain to the candidate what he or she will be earning in real terms. "The higher your benefit contributions, the lower your nett", concludes Brown.
Salary can be a deal breaker. Although the conversation may take only 15 minutes, it will have a huge impact on your life.
Somande Brown is a Training Manager at Network Recruitment.
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