Lifestyle

What no one tells you about your first payslip

You’ll have certain expectations about earning your first salary; in fact, you probably already know how you’re going to spend it, but many new employees are surprised when the amount that hits their bank account differs from their salary. That’s thanks to all the deductions and new financial responsibilities and considerations you’re dealing with.

To make the most of your first payslip, you need to make sense of it first. Here are 5 things you should know about your payslip.

1. What you earn isn’t what you take home

Your salary is how much money your employer pays you, and it’s referred to as your gross pay. From this amount, things such as tax and employer-specific contributions, e.g. UIF, medical aid or provident fund, are automatically deducted, leaving you with your net pay, which is what’s paid into your bank account.

It’s important to understand the difference because your net pay is what you take home and what you should be basing your budget and expenses on.

2. The lowdown on the line items

There’s a lot of important information on your payslip, and it can seem confusing, but it’s vital that you know what your payslip contains, what the wording means and how everything is calculated.

You need to understand each line item and why it’s there so you can check that you’ve received the correct payment into the correct account, that you are paying the right amount of tax, as well as what you are and aren’t paying towards.

PAYSLIP TERMINOLOGY
EARNINGS
Basic pay/salary: What you earn before anything is added or deducted. Gross pay: What you earn before tax and deductions. Net pay: The amount you take home after tax and deductions. Cost to company: The total package you’re receiving before tax, including all benefits or company contributions. Allowances: Additional payments for specific purposes, such as travel, cellphone, or housing, which may be taxable depending on their structure. Overtime: Additional pay for hours worked beyond your standard contracted hours. Bonuses/Commissions: Performance-based or discretionary payments.
DEDUCTIONS
UIF: Both you and your employer pay towards the Unemployment Insurance Fund so that if you become unemployed or don’t get maternity leave pay, you can claim from the fund. PAYE: Pay As You Earn is your tax deduction that your employer pays on your behalf to SARS. The percentage tax you pay is determined by the tax bracket your salary falls into. Medical aid (employee contribution): Your portion of the medical aid premium. Provident fund/pension fund (employee contribution): Your contribution towards your retirement savings. Group life/disability insurance: Contributions towards insurance that provides cover in case of death or disability. Staff loans/advances: Repayments for money borrowed from your employer. Garnishee orders/administration orders/debt review payments: Legally mandated deductions for debt repayment. Trade union subscriptions: If you are a member of a trade union.
CONTRIBUTIONS
Benefits: Extras your company offers/contributes. For example, medical aid and provident fund.
FRINGE BENEFITS
This refers to benefits that don’t get paid to you in cash, but that you enjoy the use of (e.g., the use of a vehicle or accommodation).
OTHER IMPORTANT INFORMATION
Pay period: The specific dates for which you are being paid (e.g., 1st to the 31st of the month).

3. It shows more than your salary

Your payslip is an important document that shows your proof of employment and financial stability. You’ll need it when you apply for a credit card or a loan and want to rent a place or apply for certain travel documents (e.g. visas) because it provides evidence that you can afford to pay for things and that you have a source of income that is reliable and recurring.

4. What you do with it is up to you

The way you use your first payslip can be the start of smart money moves that set you up for financial success. Keeping track of your earnings, taxes and deductions will help you create a plan for your money so that you can find the right balance between enjoying yourself, covering your expenses and laying a strong foundation for your financial future.

5. Understanding your payslip

When you receive your salary slip, take the time to review it carefully. Look for any discrepancies in your paycheque and ensure that all salary deductions are accurate. If you notice any errors, don’t hesitate to bring them to the attention of your employer’s payroll department.

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_{Disclaimer: This article is solely intended for information. It does not constitute financial, tax or investment advice or recommendation. Please speak to a financial advisor or registered financial professional before making any financial decision(s).}

_{Standard Bank, its subsidiaries or holding company, or any subsidiary of the holding company and all of its subsidiaries make no warranties or representations (implied or otherwise) as to the accuracy, completeness or fitness for purpose of the information provided in this article or that it is free from errors or omissions.}