Many of you are quite confused about your salary structures. Very few of you know the difference between total cost to company, gross, basic or cash package.
When accepting a job offer, you need to be informed so that you are not short-changed. It is very important to have a clear understanding of the various salary terms used.
After all it is your future and you are making a life decision.
The amount of salary paid to you before any additional benefits such as… medical aid, pension, and allowances. It is the part of your salary that is fixed every month and DOES NOT include overtime pay and any bonus or 13th cheque.
The amount of salary paid to you after adding all your benefits and allowances and before deducting any tax.
Made up like this:
- Basic salary
- Your contribution to medical aid, pension/provident fund, group life, etc
- Allowances such as travel, entertainment, computer, cell phone, etc
- Overtime and bonus for the specific period
What is left of your salary after deductions have been made for PAYE (tax), UIF etc.
Also referred to as “take home pay” – the amount of money that you take home every month, what is paid into your bank account.
You may have other deductions such as loans or bond re-payments and these may be deducted after the nett salary is calculated.
Cost to Company
Companies use the term “Cost to Company” to calculate the total cost to them (the Company) to employ you. i.e. all the costs associated with your employment contract.
It could include the following:
- Gross salary
- Company contributions to medical, pension/provident, UIF, SDL, group insurance etc.
- 13th cheque and bonuses
- Use of company property such as car, petrol card, computer/notebook, software etc.
- Cost of any loans, bursaries and interest-free or low interest loans
- Cost of any expenses paid on your behalf such as insurance and telephone at home etc.
- Costs of share options and incentive schemes etc.
- On Target Earnings (OTE) – if you work in a sales-related job and the salary on offer includes a commission portion
The company pays a basic salary and then pays commission on sales you have generated for the company. The commission generally kicks in only once you have made a predetermined sales target. There are various ways that the commission is calculated and almost every company has its own commission structures.