Updated: Apr 2, 2020
Salary 101: Cost to Company, NETT & Gross packages explained
Everything you need to know about Cost to Company (CTC), NETT & Gross
If you are considering a new job opportunity, then it is important to understand the full salary package and what each component entails, before you enter salary negotiations. The last thing you need is to be short-changed!
Let’s face it, when starting a new job, you look forward to your new, higher salary. The reality is that the amount that is paid into your account is not the amount that you expected! Why does this happen? Most likely, you confused the CTC with the NETT salary.
Know the difference:
Do you know the difference between Cost to Company, NETT salary, and Gross salary package is? Every salary package differs from company to company and from person to person. It is important to keep in mind that salary packages differ from company to company.
Certain benefits are regulated by local law such as the Unemployment Insurance Fund (UIF) in South Africa; as such, all employers are mandated to provide this to staff.
On the other hand, benefits such as medical aid and a 13th cheque in South Africa is not compulsory.
Deciphering your payslip:
What’s the difference between CTC, NETT, and Gross?
Let’s start with the CTC (Cost to company): This is pretty self-explanatory as it refers to the amount of money that the company agrees to spend on you; i.e. the full cost of hiring you.
Basically, your CTC is the sum of your NETT salary and your gross salary.
Cost to Company (CTC):
As mentioned above, this is the cost to the company, of employing you. It includes your basic salary; any agreed-upon benefits such as 13th cheque and medical aid; as well as government-mandated benefits such as Unemployment Insurance Fund (UIF).
Packages differ from company to company since each one has its own structure and salary components.
This is the fixed figure that you receive every month, and is what you earn before any additional company-specified benefits are added.
This is simply the cash portion of your salary, once all deductions have been made. It is also known as your take-home salary.
Employers are mandated to deduct tax every month from all employees’ salary and, in turn, pay it over to SARS for PAYE (Pay-As-You-Earn)
The Unemployment Insurance Fund (UIF) is a provision for workers who have become unemployed through retrenchments and dismissals and to those on maternity leave. The UIF contribution equates to 2% of your remuneration where 1% is from the employee and 1% from the employer every month.
Like the income tax, this deduction is also mandatory for all employees.
It is understandable to be confused when you look at your payslip, given that companies operate differently. That is why it is vital to arm yourself with the knowledge of not only the terminologies used on your payslip but also the frequency of deductions as well as the contributions that you make as compared to the contributions that the company makes.
If after everything you’re still confused, you can always request a dummy pay payslip. 🙂