Understanding your salary package
New career opportunities are exciting but it’s important to know what’s on offer
IT CAN be thrilling to be offered a new position – but it’s important to carefully consider the salary package to make sure it really is a good offer. To make an informed decision you need be clear about what the employer is offering, so answering these five questions could be useful.
1 HOW MUCH DO I GET OUT?
Know the difference between the cost to company and the net salary you take home. ▶ Cost to company This is your total salary package and includes all your employee benefits, for example the contributions you and the company make towards a pension or medical aid fund. This means the amount is much more than the salary you end up with in your bank account.
It’s often the amount given with job offers, which can be quite confusing, especially when you first start working. It’s the total amount your employer says it can spend on you as an employee, with all benefits and extras included and before any deductions are made. ▶ Net salary This is the amount paid into your bank account after deductions. Ask that all deductions be explained to you.
Some deductions are allowed, for example legal requirements such as tax and unemployment insurance, but you must give consent for optional deductions such canteen meals and membership fees.
2 A 13TH CHEQUE OR BONUS?
▶ Thirteenth cheque This isn’t a bonus. It’s an extra payment you receive that’s usually equal to your monthly salary. If a 13th cheque is part of your contract you’re entitled to it and it’s usually not dependent on whether you’ve achieved certain performance targets.
Some companies make a monthly deduction from your salary, which is then usually paid out at the end of the year. But this is neither a 13th cheque nor a bonus. ▶ Bonus This is usually linked to how you and the company perform. Your contract should stipulate performance requirements and conditions for getting a bonus. For example you might have to personally achieve a certain target, while a specific achievement might also be expected from your division or the company as a whole.
This means the bonus amount could change annually based on your own performance and that of the company. You’re not generally entitled to a specific amount unless it’s stipulated by the company in your contract.
3 WHAT IS THE POST LEVEL?
Staff are usually grouped according to their post levels. Each company decides on its own post levels and related salaries. Salaries within each post level have an upper limit, for example an employee at post level 10’s salary ceiling is R200 000 a year and post level 11’s is R300 000 a year.
If the offer you receive is close to the upper limit, you must realise you won’t be getting any major salary increases soon unless you’re promoted to the next post level.
Ask about the post level you’re being appointed at as well as your prospects for salary increases and promotions.
4 ARE YOU PREPARED TO NEGOTIATE?
Do your homework about your market worth. Check career websites (see Get Help Here below) for what a market-related salary for someone with your skills and experience might be.
Employers usually expect some negotiation about salary and they might be prepared to make you a better offer.
5 HOW A TRAVEL ALLOWANCE WORKS
This benefit is either a fixed travel allowance or reimbursive travel expenses. When your monthly tax is worked out on a fixed travel allowance you’re taxed on 80% of the allowance. But if the employer is satisfied that at least 80% of the use of the vehicle was for business purposes, you’re taxed on just 20% of the allowance.
The full amount must appear on your IRP5. You have to keep a log book according to the South African Revenue Services’ requirements and be able to prove all the travel expenses.
This only works for people who travel a lot such as company reps, says Anél di Giannatale of Ghias Accounting Services. If you get a fixed travel allowance but can’t prove you travelled enough for work you have to pay in at the end of the tax year as you received an unwarranted tax benefit.
The same applies with reimbursive travel expenses. This is when you’re using your own vehicle and your employer compensates you R3,61/km for it, Di Giannatale says. This isn’t taxable as long as you drive less than 8 000km a year. If your compensation is more than R3,61 and/or you travel more than 8 000km the travel allowance is taxable. You also have to keep a log book.