YOUR CARRER Understanding your company benefits
Tips to help you understand what your company is offering you in addition to your monthly salary
MOST companies provide employees with benefits, however, many people do not understand what each benefit means. Experts, Johann van Tonder, a financial wellness researcher and economist at Momentum and Simmone Swart, a financial advisor based in Joburg, explain what a few company benefits mean.
BENEFITS YOU MAY RECEIVE
Johann says company benefits differ from institution to institution.
“A remuneration package may consist of a basic salary, housing subsidy, medical scheme and retirement fund contribution subsidised by the employer. Other benefits include group life contributions paid by the employer such as life, disability, funeral cover and critical illness insurance, which will pay you an income should anything happen to you. Some employers offer benefits such as a 13th cheque or annual bonus, provide low cost interest rate loans, car allowances and food subsidies at the workplace. But other companies do not provide any benefits, just your salary,” says Johann.
“The big difference is that the remuneration package consisting of a salary and benefits makes it compulsory for you to save for retirement and have a medical aid scheme whereas your salary with no benefits leaves the decision and choice to you. So, the package with benefits protect you against spending your entire salary,” he says.
PENSION VERSUS PROVIDENT FUND
Johann says the main difference between a pension and provident fund is how you receive your fund benefit at retirement.
“If you are a member of a pension fund, you may elect to receive up to a third of your retirement benefit as a cash lump sum, with the remaining two-thirds being paid monthly. This monthly income will be taxed at the average rate of taxation in retirement. If no cash lump sum is taken, your full benefit will be paid monthly, resulting in a higher monthly pension,” he says.
BENEFITS PROTECT YOU AGAINST SPENDING YOUR ENTIRE SALARY
“Also, when contributing to a pension fund while working, the contributions are tax deductible. If you are a member of a provident fund, you can choose to take your entire retirement benefit as a lump sum. A portion of this may be tax-free, but you will be taxed on the portion which is not exempt from tax.”
WAGE AND SALARY
Simonne says wages are generally paid weekly and the amount may differ each week depending on the hours worked or negotiated rates.
Employees earning a wage may not necessarily be entitled to any company benefits as in most cases they are contracted for a short period of time.
“A salary is paid monthly to temporary or permanent employees. A salary package is negotiated at the start of the employment contract and may or may not include company benefits,” says Simmone.
HAVE A RETIREMENT FUND
Simmone says a retirement fund is used to provide you with an income after you retire.
In addition, Johann says a retirement fund is the money you saved and accumulated over your working career in order to receive an income in retirement. How much you save will determine how much money you will receive each month.
“The more you save during your working life, the higher your income will be in retirement. If you save very little, your income will be low,” he says.
UNEMPLOYMENT INSURANCE FUND
Johann says the Unemployment Insurance Fund (UIF) provides you with a small income for about six months should you lose your job.
According to the Department of Labour, “Employers must pay an unemployment insurance contribution of 2 per cent of the value of each worker’s pay per month. The employer and worker each contribute 1 per cent. Contributions are paid
to the UIF or South African Revenue Services (SARS).” According to SARS, “UIF gives short-term relief to workers when they become unemployed or are unable to work because of maternity, adoption leave, or illness. It also provides relief to the dependants of a deceased contributor.”
Johann says government and the private sector provide medical care to employees.
“A medical aid can protect you against big medical expenses. For a monthly contribution, medical aids cover a certain number of doctor visits, some medication and hospital care,” he says. Some companies offer discounts on gym memberships or healthy meals. Johann says companies are realising that as an employee, your health is very important.
“If you are sick, you are not able to do the same work as a healthy employee. Eating fruit, healthy meals and gym membership all contribute towards assisting you to live a healthy life. This also improves your productivity, which, in turn enables companies to provide better services and products to consumers,” he says.