Understanding your Cost to Company

When entering the job market, you will find that salary is an ever-present issue that influences a variety of factors in your search for a new position. As such, understanding the structure of your current salary is an integral part of the process. Not only will this understanding empower you and your recruiter in matching your skill set to the right role, but it will also aid in negotiating for the very best possible offer.

Here are some factors to consider when trying to understand your salary.

Basic Salary

When looking at your payslip, the first thing you may see is something called a “basic salary” or “cash component.” This is the portion of your salary that is taxable and does not include any benefits, company contributions or allowances. As the name suggests this forms the basis of your total salary.

Company Contributions/ Benefits

The next item you may notice on your payslip is the company contributions. This section might have a different name depending on your company and the system they use to generate a payslip. Regardless of what it is called, this will include company contributions such as medical aid, pension, provident, risk benefits, etc. You will need to know exactly what the company contributes towards, as it influences the total sum of your salary.

Allowances

In some cases, you may receive allowances for certain necessities that will allow you to perform your function. This may include items such as a travel-, cell phone-, petrol-, car- or even a home office allowance. ?A petrol card may not reflect on the payslip; however, it is important to mention this to your recruiter/ prospective employer as it is still an allowance. As these allowances have monetary value it stands to reason that they too will form part of the total sum of your salary. These allowances may also carry cash benefits that you will need to remember in your negotiations.

Bonuses

Another factor to consider is the bonus component, which can include guaranteed or non-guaranteed bonuses. A guaranteed bonus is a fixed bonus that you receive each year, usually to the value of your basic salary and is payable regardless of company or personal performance. This is often referred to as a 13th cheque. Whereas a non-guaranteed bonus usually is completely dependent on a combination of company and personal performance and is payable at the company’s discretion. There are no guarantees as to what the bonus amounts to or if there even will be a bonus. As such only a guaranteed bonus forms part of the sum of your salary.

Cost to Company (CTC)

It is important to take all the above into account when discussing salary with a prospective employer or recruiter as this is how your Cost to Company (CTC) is calculated. This term refers to the fixed/guaranteed total amount that a company spends on an employee, i.e. the sum of your salary. It is an amount that is calculated by adding the company contributions/benefits, guaranteed bonuses and allowances to the basic salary and will give you a more accurate and clear picture of your salary.

Your total CTC per annum will be calculated as follows:

Basic Salary + Company Contributions + Allowances = CTC per month

CTC per month x 12 = CTC per annum

CTC per annum + Guaranteed 13th Cheque = Total CTC per annum

Net Salary

After you have determined your salary structure and what your CTC is, it is important to take note of the net salary or “take-home.” Your net salary is the amount that is deposited into your bank account after UIF, PAYE, employee contributions, staff loans or any other line item has been deducted.

Increases

In addition to understanding the structure of your salary, any upcoming increases need to be mentioned to your recruiter. Although it is extremely difficult and unlikely to negotiate an increase on top of an upcoming increase, you might just get a company that will take this into account in the negotiation process.

In conclusion, while the prospect of entering the job market may be daunting, the process of finding new employment can be made easier by understanding something as basic as your salary structure. This helps you in applying for suitable roles, negotiating offers and helping you make that very important career decision.