Earning a salary is not as simple as being paid the agreed amount offered by your employer at the end of the month. The reality is that a number of deductions are made against your income.
According to the Basic Conditions of Employment Act, funds may be deducted from your salary only if an agreement to do so has been signed, and if your employer is legally allowed to do so.
Herman Lombard, the founder and executive director of financial services provider African Unity, says you should regularly check your payslips to ensure that no unauthorised deductions are made.
“The usual compulsory deductions include tax and Unemployment Insurance Fund (UIF) contributions,” he says. “Pensions and medical scheme contributions may also be included, as per your agreement with your company.
“Other deductions which would be considered voluntary could include loans from your employer, donations towards a particular cause or even membership fees to the union you may belong to.”
Another deduction to be aware of is a garnishee, more formally known as an emoluments attachment order.This is usually issued through the courts by a creditor to the employer, demanding that the employer deduct money from an employee’s salary or wage to pay debt.
In July 2017, the Courts of Law Amendment Act was signed into effect, so there is now a limit to the total amount that can be deducted from your salary, which is no more than 25percent from your salary or wage.
Your wage is based on the number of hours worked, at an hourly rate. It is likely that you would be paid on a weekly basis. If you earn a monthly salary, your gross salary is the amount of money you earn before deductions and any bonuses and benefits which may be added. Your net salary is the amount you receive after tax.
Payments from your earnings that your employer is responsible for deducting, by law, are UIF and Pay As You Earn (PAYE). If you lose your job, go on maternity leave or become ill, you will be able to draw from the UIF which will offer short-term financial relief. If you die in service, it will provide financial relief to your dependants. Both you and your employer contribute to this fund.
It is important to check tax and unemployment insurance deductions. You should also ensure that these deductions have been paid over to the South African Revenue Service (Sars) and the Department of Labour, respectively, by looking at the IRP5 certificate issued at the end of a tax year.
You will be held liable along with your employer, if your taxes are not paid. You don't want to risk not being able to claim UIF at a time when you need it most.
If your employer contributes towards a medical scheme, a pension fund, income protection or a retirement annuity (RA), and these costs are deducted from your earnings, it will be taken into account when your PAYE amount is calculated. Funds paid towards an RA are deducted from your taxable income. As a benefit, no tax is paid on RA investment returns.
Sars states that the income amount above which individuals must pay tax for the period March 1, 2018 to February 28, 2019 is R78150 for income earners younger than 65 years of age.