Understanding your payslip
I Tis something you may get every month but often you do not really look at it. All you are really interested in is that amount of money that goes into your bank account and the end of the month. But understanding your payslip is vital, as it is one the most important pieces of paper in your life, if you are employed.
Without it, you will have a hard time applying for credit, a phone contract, a home loan or a lease agreement.
And if any of the details on your payslip are incorrect, it could be seen as a fake.
A payslip is a useful document that breaks down your income and deductions. It’s also your proof of employment.
All payslips look a bit different but the details on them are mostly the same.
A Payslip should contain:
Your employer’s name and address
Your name and surname, ID number, job title and staff code or employment number
The period for which payment is made
Your total salary
The payment rate and specific payment if you worked overtime or, for example, on a public holiday
All deductions
Your net pay
Some of the important uses for a payslip include:
Applying for a loan like a car loan Negotiating your package with a prospective employer
Going into a rental agreement for a place to stay
Our advice comes from an accountant, Sandziso Zwane, who is also passionate about financial education in Eswatini.
“The payslip is one of those important documents in your life which is often forgotten until it is required. It is a useful document that breaks down your income and deductions.”
Here’s what you need to know about that all-important document: Deductions - When looking at deductions, it is important to note that voluntary deductions cannot exceed 25 per cent of your gross pay. Voluntary deductions include staff loans, gym membership fees and in some cases union fees. Compulsory deductions include PAYE and Pension Fund.
Deductions related to benefits, such as medical aid, life cover and funeral cover are usually voluntary but can sometimes be compulsory depending on your employer’s policy. Remember that these are not standard amounts in all industries and they can differ from company to company.
Basic salary - The rate agreed between you and your employer as your set pay, without any bonuses or overtime.
Gross pay - The amount that you actually earn before deductions from your salary.
Net pay - The amount that gets paid into your bank account. It is the amount that you will take home after deductions.
Cost to Company - This term refers to the total salary package of an employee. It is the pre-tax salary and includes all benefits the company is offering.
Debt deductions/garnishments - Your employer can make deductions to pay your creditors if there is a court order. The deductions may not exceed 25 per cent of your remuneration.
Fringe benefits - These are benefits given to you over and above your basic salary, for example, a travel allowance, housing allowance, lunch or airtime. Performance bonuses, overtime claims and commissions. You usually pay tax on these benefits.
PAYE - This stands for ‘Pay As You Earn’ and it is the type of income tax that you pay. Your employer will deduct PAYE from your salary on a monthly basis and pay it to ERS on your behalf. The amount of PAYE that you will contribute depends on how much you earn, and is calculated from tax tables issued annually by ERS. The ERS is responsible for the collection of all taxes in the country.
According to Zwane, understanding your payslip is one of the first steps required on the journey to financial freedom because knowing how much you earn, how much you are spending on items like medical aid and tax impacts your budget for other monthly expenses.
“Take the time today to go through your payslip and truly understand every line on it,” he said.