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    bank better, live better

    making sense of your salary slip

    Discovering that the salary you imagined yourself to be earning is not the amount that gets paid into your bank account can be a shock. Especially if you don’t know how the deductions work or what they are for.

    making sense of your salary slip

    Companies are legally obligated, for example, to pay tax on our behalf. Once you understand the deductions, you can draw up a realistic budget based on what you get out each month.

    Your salary explained

    • Cost to company (CTC) is the term for your total, pre-tax salary package including the benefits you receive, as applicable to your terms of employment. It’s what it costs your employer to engage your services each month
    • Basic salary is what you earn without benefits or bonuses
    • Gross salary refers to what you earn before deductions
    • Net salary is your take-home salary after all deductions – the amount paid into your bank account. This is the cash amount you have to work with each month to pay for day-to-day expenses

    Tip: When you sign your employment contract, ask what amount your net pay will be. Just write a politely worded email to your new manager or human resources. Do the same if you have any queries about the calculations on your salary slip.

    How tax works

    • PAYE (pay as you earn) is the tax your employer pays to the South African Revenue Service (SARS) on your behalf each month. This deduction is compulsory, and the amount is calculated according to what you earn. The percentage of tax you pay, increases the higher your salary. It is your individual responsibility to register as a taxpayer and to make sure that your employer pays the correct amount of tax to SARS. You also have to complete a tax return at the end of each financial year to show that you are paid up
    • UIF is a compulsory monthly contribution made to the state’s Unemployment Insurance Fund. You and your employer each pay 1% of your total salary to the fund. If you for instance lose your job, become ill for an extended period or do not receive maternity benefits, you can claim UIF

    Tip: Before accepting a salary increase, first ask the payroll department to run a tax calculation on what you will owe SARS, in case the increase pushes you into a higher tax bracket. Sometimes your net pay can decrease because you are paying higher taxes on your new gross salary. You could then ask if other tax-friendly benefits such as a petrol allowance, could be more tax-efficient.

    Other salary deductions

    • Retirement funds: Part of your salary may go towards a pension or provident fund, depending on company policy, and are deducted from your gross salary. These contributions are designed to help you ​save for your retirement, and affect the tax you pay each month
    • Medical aid: If you get ​medical aid via your company, your contribution to the premium will be deducted from your gross salary. If your company contributes an extra amount towards your medical benefits, this amount will be taxed
    • Fringe benefits: These are benefits with a monetary value given to you over and above your basic salary. They may include items such as a company retirement fund and medical aid contributions, risk-cover premiums or travel allowances. You pay tax on these benefits
    • Other deductions: Any debt repayments, union fees, gym fees or donations to charities that you have asked be deducted from your salary will also be shown

    Tip: If your company provides retirement benefits, ensure you understand all the options available to you. There are usually different funds you can invest in, with some performing better than others.

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