YOUR CARRER Un­der­stand­ing your com­pany ben­e­fits

Tips to help you un­der­stand what your com­pany is of­fer­ing you in ad­di­tion to your monthly salary

Move! - - CONTENTS - By Boi­tumelo Mat­shaba

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

LIFE­STYLE BEN­E­FITS

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.”

MED­I­CAL AID

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.

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