Life Style

Decoding your payslip

By: Alexander Forbes

pridenews-logoEmployers must provide employees with a detailed payslip. Yet, most people don’t understand or check its details.
Happy Ngale, a financial planner at Alexander Forbes Financial Planning Consultants, explains that employees need to check their payslips to ensure there are no mistakes. Things such as tax and Unemployment Insurance Fund (UIF)
should always be paid by the company and the correct amounts must be deducted from the employee.

“If the employer deducts too little tax, the employee will ultimately be responsible for paying the shortfall at a later stage,” says Ngale.

So, what do the most commonly found terms on your payslip mean?

Basic salary

The total income amount agreed between employee and employee, without any bonuses or overtime added on to it. Gross salary The total amount earned before deductions are made. It may include earnings for overtime and bonuses.

Total cost to company

The total salary package. This amount is before tax and includes all the benefits in an employee’s salary package.

Net salary

The total amount paid to an employee after deductions.

Pay as you earn tax (PAYE)
The tax that employers must deduct from the employee’s income and pay monthly to the South African Revenue Service (SARS).

Unemployment Insurance Fund
Insurance fund that provides employees with an income for a short period if they become unemployed or are unable to work because of pregnancy, adoption leave or illness. It also provides relief to the dependents of a deceased contributor.

Fringe benefits
An employment benefit granted by an employer that has a monetary value but that doesn’t affect basic salary rates. All fringe benefits are taxable unless tax law specifically excludes it. Fringe benefits can include retirement fund contributions, risk-cover premiums and car allowances.

Retirement fund payments
Contribution into a retirement fund. This can be a pension fund, provident fund or retirement annuity, with its main objective being to provide employees with an income at retirement.

Deductions
Amounts an employer is legally required to
deduct from your salary each time you’re paid.

These items qualify:
Tax from an employee’s salary to pay SARS.

UIF contribution.
Union subscriptions paid by a stop order which the employee has agreed to.
Medical aid contribution paid directly to the medical aid fund.
Retirement fund contribution paid directly to the retirement fund.
Deductions in terms of a written agreement with the employee to pay back a debt. For example, a study loan.
Deductions in terms of a salary attachment order.
Speak to someone in your payroll department if you’re unsure about something on your payslip, or if you think there might be a mistake.

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