In order to plan your finances properly, you need to know how much you’re getting paid and what all your deductions mean. However, payslips can seem a bit confusing at first, especially if you aren’t familiar with the terminology they use.
Here is some essential information you need to know in order to understand your salary.
What is basic pay?
Basic pay is the rate that you and your employer agree on as your salary. This does not include any overtime or benefits.
What is CTC?
CTC means ‘Cost to Company’. It’s your gross salary plus benefits – the total amount that the company spends on you each month.
What’s the difference between gross and net pay?
Gross pay is your salary before taxes and other deductions.
Net pay is the amount of money you actually get after all deductions have been made. It’s essentially the money you have in your pocket on payday.
What are deductions?
Deductions are amounts that are removed from your gross salary before the money is given to you. They can be divided into compulsory deductions and voluntary deductions. Compulsory deductions include tax while voluntary deductions are the ones you choose, such as medical aid.
What are employee benefits?
Employee benefits provide non-wage compensation in addition to your normal salary. Benefits may include medical aid and pension or provident fund, and they vary between companies and industries.
In short, payslips are an excellent way to keep track of your money throughout your career. If you understand what they mean, you will be able to budget and plan much more effectively.