IN JUSTabout every company, employees are always looking forward to pay day. But veryfew of them understand how their salary is structured and it is very importantto know how much you will be taking home and which portion of your basic salarygoes where.
KNOW YOURPAY GRADE
During yoursalary negotiations at your new job, you come to an agreed payment amount withyour prospective employer. However, that amount never makes it to your bank accountdue to varying factors. Compensation is the reason many of us go to work, yetit’s a topic often left behind closed doors and discussed in whispers. It isbeneficial to you as an employee to understand your pay grade. This will guideyou in negotiating your salary and not to be underpaid by your employer. Human Resource Practitioner at BritishAmerican Tobacco South Africa, Sandla Jubase, says the practice of pay grade orbands by companies is to eliminate the need to have market data for everyposition in the company.
DIFFERENTTYPES OF SALARIES
A basicsalary is the amount of money you earn before any add-ons or deductions. Onemay earn a certain amount and then get dividends from shares or overtimeremuneration. Those at a junior level usually take a higher percentage of theirbasic salary compared to those at senior level.Cost to company is a term used to calculate the total cost to thecompany to employ you. In other words, all the costs associated with youremployment contract. This could include company contributions to medical aid,pension or provident funds, Unemployment Insurance Fund (UIF), group insuranceetc. There are usually more company benefits for people who are permanentlyemployed than those on contract.
KNOW WHEREYOUR MONEY GOES
Sandla saysyou should look at your pay slip and understand each component well. He sayseven though salary structures differ from company to company or even fromindustry to industry, there are basic common factors such as earnings, benefitsand 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. Thesecomponents are beneficial to both the employer and employee in the event of illhealth, retrenchment or retirement. He advises that depending on your age, youshould be very mindful of how much goes towards each. “It's not wise forsomeone in their 40s to cash in on their retirement fund when they change jobsbecause they have about 25 years of working years ahead of them. Whatever theymay save will not leave them with enough for a comfortable retirement,” hewarns. He says rather take a certain percentage of your payout and transfer theother to your new employer’s pension fund.
WHEN YOUCHANGE JOBS
It ishighly unlikely that you will work for one employer until you retire. Beingpart of the workforce means that you’re obligated to have a pension orprovident fund and both you and your employer contribute to this fund. “There’s something called a preservationprovident fund where you can transfer your pension into. It is to safeguardyour retirement savings,” says Debbie Netto-Jonker, founder of NettoInvest. Debbie advises employees toengage an independent fee-based certified financial planner who is focused onyour best interests and who looks at your retirement savings as part of youroverall financial plan.
UNEMPLOYMENTINSURANCE FUND
The UIFgives short-term relief to workers when they become unemployed or are unable towork because of maternity, adoption leave, or illness. It also provides reliefto the dependants of a deceased contributor. Both the employer and employeecontribute towards this fund.
PERSONALINCOME TAX
People whoare younger than 65 years of age and earn more than R75 000 per annum areliable to pay tax. Your employer is obligated to take the income tax from yourgross salary and, in turn, pay it over to the South African Revenue Services(SARS).
