HR Pulse

The Importance Of Understanding What You Earn

Having worked in the recruitment / HR environment for many years I am still surprised by the amount of candidates who don’t know what they actually earn. If you are looking for another job it is critical to have a thorough understanding of your package as well as the structure of the package to avoid any confusion when it comes to the offer stage.

Have a read through the following acronyms and understand your salary with ease:

 
Total cost of employment (TCOE)
Essentially the full amount that your employment with a company is valued at and includes the cash component of a salary, benefit contributions, 13th cheque and anything else that you are guaranteed to earn whilst in their employ.

On target earnings (OTE)
This is generally applicable to anyone in sales or people who are eligible for additional earning by virtue of meeting a target. Another term for this could be commission or outperformance payment and could be paid monthly or quarterly.
 
Nett salary
The amount that goes into your bank account each month after all deductions.
 
Benefit contributions
This is used to describe what the company contributes towards your medical aid or provident fund. Companies will often say that their medical aid is 50 50. This means that the employer will pay half of the employee’s medical aid and the employee will be expected to contribute the other 50%.
 
Additional benefits
Examples of this could be someone who is given a company car / company cell phone / unlimited fuel card. These benefits have a monetary value so they need to be considered when communicating a salary amount. For example: if an employee leaves the employ of the Company they will need to return the Company car and invariably buy themselves another one so the cost of a car payment needs to be taken into accounts on top of other elements of the salary.
 
Company shares
Shares also have a value. Make sure you understand your companies share policy and what would happen to the shares if you were to resign.
 
Travel policy / Education financial assistance
Many companies will require you to sign a document stating that you agree to pay back money that was spent on you if you leave before the stipulated period. Make sure you know how that will potentially affect your back pocket.
 
Salary sacrifice / structure
In an attempt to raise the nett salary for an employee employers will, at times, do what is called a salary sacrifice. A salary sacrifice is basically deducting the benefits before taxing someone so that their take home is higher. This presents a challenge when the new employer is working out packages and don’t structure things the same way because even though the new employer is offering a competitive increase on total complete package, it may not relate to an increase in the nett amount.
 
In the recruitment process there is always complexity surrounding salaries …… make it easier by knowing what you package consists of!