Share

Understanding your salary

accreditation

IN JUST about every company, employees are always looking forward to pay day. But very few of them understand how their salary is structured and it is very important to know how much you will be taking home and which portion of your basic salary goes where.  

KNOW YOUR PAY GRADE

During your salary negotiations at your new job, you come to an agreed payment amount with your prospective employer. However, that amount never makes it to your bank account due to varying factors. Compensation is the reason many of us go to work, yet it’s a topic often left behind closed doors and discussed in whispers. It is beneficial to you as an employee to understand your pay grade. This will guide you in negotiating your salary and not to be underpaid by your employer. Human Resource Practitioner at British American Tobacco South Africa, Sandla Jubase, says the practice of pay grade or bands by companies is to eliminate the need to have market data for every position in the company.

DIFFERENT TYPES OF SALARIES

A basic salary is the amount of money you earn before any add-ons or deductions. One may earn a certain amount and then get dividends from shares or overtime remuneration. Those at a junior level usually take a higher percentage of their basic salary compared to those at senior level.  Cost to company 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 aid, pension or provident funds, Unemployment Insurance Fund (UIF), group insurance etc. There are usually more company benefits for people who are permanently employed than those on contract.

KNOW WHERE YOUR MONEY GOES

Sandla says you should look at your pay slip and understand each component well. He says even though salary structures differ from company to company or even from industry to industry, there are basic common factors such as earnings, benefits and deductions, while things such as medical aid, pension or provident funds, UIF, income tax to mention a few can be seen on just about every salary slip. These components are beneficial to both the employer and employee in the event of ill health, retrenchment or retirement. He advises that depending on your age, you should be very mindful of how much goes towards each. “It's not wise for someone in their 40s to cash in on their retirement fund when they change jobs because they have about 25 years of working years ahead of them. Whatever they may save will not leave them with enough for a comfortable retirement,” he warns. He says rather take a certain percentage of your payout and transfer the other to your new employer’s pension fund.

WHEN YOU CHANGE JOBS

It is highly unlikely that you will work for one employer until you retire. Being part of the workforce means that you’re obligated to have a pension or provident fund and both you and your employer contribute to this fund.  “There’s something called a preservation provident fund where you can transfer your pension into. It is to safeguard your retirement savings,” says Debbie Netto-Jonker, founder of Netto Invest.  Debbie advises employees to engage an independent fee-based certified financial planner who is focused on your best interests and who looks at your retirement savings as part of your overall financial plan. 

UNEMPLOYMENT INSURANCE FUND

The UIF gives short-term relief to workers when they become unemployed or are unable to work because of maternity, adoption leave, or illness. It also provides relief to the dependants of a deceased contributor. Both the employer and employee contribute towards this fund.

PERSONAL INCOME TAX

People who are younger than 65 years of age and earn more than R75 000 per annum are liable to pay tax. Your employer is obligated to take the income tax from your gross salary and, in turn, pay it over to the South African Revenue Services (SARS).

Get the best in Soccer, News and Lifestyle content with SNL24 PLUS
For 14 free days, you can have access to the best from Soccer Laduma, KickOff, Daily Sun, TrueLove and Drum. Thereafter you will be billed R29 per month. You can cancel anytime and if you cancel within 14 days you won't be billed.
Subscribe to SNL24 PLUS
heading
description
username
Show Comments ()