We all get very excited at the end of the month when payday is finally on the horizon. It's after all what we work for every month, that all important pay cheque. When asked how much we earn, almost all of us can tell you the amount of money that ends in our bank account, but very few of us knows the difference between total Cost to Company, Gross, Basic or a Cash package.
Many times the confusion around earnings and exactly how your salary is structured only becomes known when you start looking for a new job or are trying to negotiate your salary. As a result, many jobseekers mistakenly accept a job offer before carefully considering the salary package on offer.
The reality is very few companies in South Africa structure their salary packages in the same way, so it's important to ensure you are very clear on what you are currently earning and what you would like to be earning at a new job.
Here are the key terms explained to help you out:
Your "Basic Salary" is the amount you earn before any additional benefits such as medical aid, pension, and allowances are added to your salary. Your basic salary is the section of your salary that is fixed every month and would not include any bonuses or 13th cheque.
Cost to Company:
This is a term used to calculate the total cost to the Company to employ you, in other words all the costs associated with your employment contract. This could include company contributions to Medical, Pension/Provident, UIF, SDL, group insurance etc.
This seems to be the one that people have the least problems with, as everybody is very much aware of the money that is paid into their bank at the end of the day. Nett salary is also referred to as "take home pay" – the amount of money that you take home every month.
The process of deducting or withholding tax from remuneration as it is earned by an employee is referred to as Pay-As-You-Earn. All employers are required to deduct Employees' Tax from their salaries. The amounts deducted must be paid by the employer to SARS on a monthly basis. This is calculated by your employer using the latest tax tables. Depending on what you earn, you will pay SITE and/or PAYE tax.
It is compulsory to pay 1% of your gross earnings into the governments Unemployment Insurance Fund. Your employer also has to pay 1% of your gross earnings, making the total contribution 2% each month.
Some larger companies have medical aid schemes for their staff. If you join, you qualify for the Medical Scheme Fees Tax Credit. This is a fixed monthly amount that increases according to the number of dependents and is taken off after you calculate your taxable income.
Besides your salary and leave, there are a number of other benefits that companies offer that can add real value. The Top Employer Institute's 2014 certification program recently identified the most popular benefits that are offered by some of the top employers in the country.
- Flexible working hours
- Learning and development programs
- Travel opportunities
- Day Care or Crèche facilities
When you are scouting out a potential employer, make sure it's the right fit for you. Understand your salary breakdown and know what's your worth. If you want to be happy with your job, benefits will matter as much as (if not more than) salary in the long run, so make sure you find out exactly what a new company would be able to offer you before you make a final decision.
If you need assistance in your job search, Communicate Recruitment are waiting for your call. We represent some of the top candidates out there. Contact us today to become part of this elite group. Communicate Recruitment is a recruitment agency with consultants specialising in finding Finance jobs, IT jobs, Engineering jobs, Freight jobs and Supply Chain jobs. Check out our vacancy page and apply now!