Most of us open our payslips for a cursory glance at the ‘nett amount’ line, ignoring the rest of the financial lingo, but it’s important to understand what you’re getting and how it was calculated.
As you scan through your payslip, you’ll notice that a number of deductions are made against your income – you may be clued up on some, while others remain something of a mystery. According to Herman Lombard, founder and Executive Director at financial services provider African Unity, it’s important to check each payslip you receive and
ensure no unauthorised deductions have been made, as the Basic Conditions of Employment Act 75 of 1997 states that funds may only be deducted from your earnings if you and your employer have signed a legal agreement.
According to Herman, ‘taxpayers don’t need to submit an income tax return if their total employment income for the year before tax is less than R500 000, or if they receive an income from only one employer for the full tax year, or if they have no other form of income or other tax-related deductions to claim for’.
Salary and wage deductions
Herman explains that compulsory deductions to be aware of include Pay as You Earn (PAYE) tax and the Unemployment Insurance Fund (UIF). Other agreed deductions may include medical aid and pension contributions, as well as further voluntary deductions, which ‘could include loans from your employer, donations towards a particular cause, or even membership fees of the union you may belong to’, Herman adds. Finally, you should also be aware of a garnishee deduction, also known as an emolument attachment order (EAO). This is usually issued to an employer by a creditor through the courts, demanding that the employer deduct money from an employee’s salary or wage to pay a debt. No more than 25% may be deducted from your salary or wages – a limit imposed by the Courts of Law Amendment Act 7 of 2017.
Salaries vs wages
Salaries generally refer to an amount earned each month, while a wage is based on the number of hours worked and
is usually calculated at an hourly rate. Wages are most often paid on a weekly, rather than a monthly, basis.
- Gross pay refers to the amount you earn before deductions or bonuses have been calculated.
- Nett pay is the amount paid into your account, or your ‘take-home’ salary after deductions.
- Employee number is a unique identifying number assigned to each employee when they join a company.
- PAYE is the income tax deducted from your earnings by your employer and paid to the SA Revenue Service (SARS) on your behalf. The amount you’re required to contribute depends on your earnings and is calculated using tax tables issued by SARS annually.
- UIF deductions are made from your salary each month. You and your employer each pay 1% of your total salary into this fund monthly. You’ll be able to withdraw from your UIF for short-term relief in the event of illness, maternity, adoption leave or retrenchment.
PAYE and UIF
By law, your employer’s responsible for deducting both PAYE and UIF, though you should always double-check your IRP5 certificate to ensure these amounts have been paid to the Department of Labour and SARS. If your taxes aren’t being paid, you will be held liable along with your employer, and you may not be able to claim UIF when it’s most needed.
If your employer contributes towards, a pension fund, income protection, medical aid or retirement annuity (RA), and these costs are deducted from your earnings, this will be taken into account when your PAYE amount is calculated. Retirement annuity funds are deducted from your taxable income and no tax is paid on RA investment returns.
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