Many of you are quite confused about your salary structures. When asked how much you earn, almost all of you can tell us what you take home, but very few of you know the difference between Total cost to company, Gross, Basic or Cash package.
When accepting a job offer, you need to be informed so that you are not short-changed. It is very important to have a clear understanding of the various salary terms used. After all it is your future and you are making a life decision. Basic Salary
Your "Basic Salary" is the amount of salary paid to you before any additional benefits such as medical aid, pension, and allowances are added. This is your basic pay. Your basic salary is the part of your salary that is fixed every month. Not included is overtime pay and any bonus or 13th cheque.
Your "Gross Salary" is the amount of salary paid to you after adding all your benefits and allowances and before deducting any tax. Made up like this:
Your contribution to Medical Aid, Pension/Provident fund, Group Life etc
Allowances such as Travel, Entertainment, Computer, Cell phone, etc
Overtime and Bonus for the specific period.
Your "Nett Salary" is what is left of your salary after deductions have been made for PAYE (tax), UIF etc. This is also the amount that is paid into you bank account on a monthly basis. You may have other deductions such as loan or bond re-payments and these may be deducted after the nett salary is calculated. So the salary paid into you bank account would be your nett salary less these repayments. Nett salary is also referred to as "take home pay" - the amount of money that you take home every month.
Cost to Company
Companies use the term "Cost to Company" to calculate the total cost to them (the Company) to employ you. i.e. all the costs associated with your employment contract. Cost to Company could include the following:
Company contributions to Medical, Pension/provident, UIF, SDL, Group insurance etc.
13th Cheque and Bonuses
Use of company property such as car, petrol card, computer/notebook, software etc.
Cost of any loans, bursaries and interest free or low interest loans
Cost of any expenses paid on your behalf such as insurance & telephone at home etc.
Costs of share options & incentive schemes etc.
On Target Earnings (OTE)
If you work in a sales-related job and the salary on offer includes a commission portion, this is referred to as OTE. The company pays a basic salary and then pays commission on sales you have generated for the company. The commission generally kicks in only once you have made a predetermined sales target. There are various ways that the commission is calculated and almost every company has its own commission structures.