MONEY 101: Un­der­stand­ing your payslip

Finweek English Edition - - MONEY - BY KRISTIA VAN HEER­DEN ed­i­to­

We are of­ten paral­ysed by the idea of in­vest­ing, but be­com­ing a suc­cess­ful in­vestor starts long be­fore you make your first in­vest­ment. In this se­ries of ar­ti­cles, Finweek draws up a road map to get you from fi­nan­cially flus­tered to in­vest­ing with con­fi­dence.

Be­fore we get to the nitty-gritty of in­vest­ing, we need to lay the foun­da­tion for a healthy bank bal­ance, start­ing with your in­come. Most peo­ple rely on their monthly in­come to sus­tain them­selves and build wealth. En­sur­ing that you know where your money is go­ing starts with un­der­stand­ing your payslip.

Em­ploy­ers are re­quired by law to keep a record of money paid to an em­ployee in the form of a payslip, ex­plains Lisa Griffiths, as­so­ciate direc­tor of fi­nan­cial ser­vices at BDO Wealth Ad­vis­ers. If you af­ford your payslip no more than a cur­sory glance, you could be los­ing money be­fore

your salary even hits your bank ac­count.

The ba­sic struc­ture of your payslip

Your first point of de­par­ture when look­ing at your payslip should be fa­mil­iaris­ing your­self with what is nor­mal. This will help you spot de­vi­a­tions eas­ily.

Your payslip may also in­clude sec­tions like your to­tal earn­ings for the year and avail­able leave days.

Com­mis­sion, over­time and bonuses must be ref lected as in­di­vid­ual items on your payslip and ref lected in your tax cer­tifi­cate ev­ery year, says Rob Cooper, Sage VIP’s tax ex­pert.

Tax im­pli­ca­tions

“It is im­por­tant to be aware of fringe benefits, as th­ese have an im­pact on your tax con­tri­bu­tion,” Cooper ad­vises. Fringe benefits are con­tri­bu­tions made by the em­ployer that the em­ployee is taxed on, and in­cludes benefits like a com­pany car and com­pany con­tri­bu­tions to a re­tire­ment an­nu­ity or med­i­cal aid.

“Of­ten t hese con­tri­bu­tions are added to­gether and in­di­cated as a sin­gle amount on your payslip. The val­ues change ev­ery year and an em­ployer has ev­ery right to ask for a de­tailed ac­count of th­ese benefits,” he says. He adds that de­duc­tions re­duce your ta xable re­mu­ner­a­tion. In terms of med­i­cal aid con­tri­bu­tions, a pro­posed change in leg­is­la­tion to the med­i­cal scheme fees ta x credit, ex­pected to take ef­fect in March 2016, could have a dra­matic im­pact on an em­ploy­ees’ net pay, which in turn af­fects the amount of ta x payable. Be­cause com­pa­nies aren’t re­quired to get em­ployee con­sent to im­ple­ment statu­tory changes, this dra­matic change can hap­pen sud­denly and un­ex­pect­edly.

Empl oy e e s wh o ea r n on l y com­mis­sion should en­sure that it is in­di­cated as such on their payslip. “If you earn only com­mis­sion, you can claim ex­penses,” Cooper says. Ask­ing the right ques­tions “When you re­ceive an of­fer from an em­ployer, make sure you take the time to f ully un­der­stand the to­tal value of what you are be­ing of­fered. Some com­pa­nies op­er­ate on a to­tal cost to com­pany ba­sis, which means that the amount they of­fer is the full value of your cash salary plus the value of all of the benefits. Oth­ers op­er­ate on a salary plus benefits ba­sis, which means that the amount they of­fer is just the cash salary amount.

“It’s im­por­tant to un­der­stand what benefits are also of­fered and the to­tal value of th­ese benefits. This will help you to make an in­formed de­ci­sion be­fore ac­cept­ing an of­fer. It’s also a good idea to ask about how the com­pany han­dles t hings l i ke per­for­mance bonuses, com­mis­sion or 13th cheques. This will help you to un­der­stand if there is the po­ten­tial to earn more than the of­fered pack­age, and if so, what you need to do to be el­i­gi­ble,” says Si­fiso Mthembu, an ex­ec­u­tive at FNB Hu­man Re­sources.

Griff it hs and Cooper agree it ’s im­por­tant to read your payslip ev­ery month and to keep a copy. Cooper says payslips can be used as proof if any mis­takes creep in on your tax cer­tifi­cate and are of­ten re­quired when ap­ply­ing for credit.

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