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Published: May 8, 2020 Categories: Financial wellness, Personal loans, Workplace loans Tags: Payroll lending, Salary
You go to work, you get your salary, you check your payslip to see how much money you take home this month, and then you probably forget about that piece of paper. The truth is that your payslip is one of the most important documents you receive, and you should use it to improve your financial wellness.
By law, every employed person should receive a payslip. The Basic Conditions of Employment Act even stipulates the information that must be on your payslip:
Your employer’s name and address
Your name and occupation
Period for which payment is made, eg, May 2020
Total salary or wages for the month (this is your gross payment)
Any deductions, such as tax (PAYE), UIF and union fees
The actual amount paid (this is your net salary, or take-home pay)
How much you are paid for normal hours and how much for overtime
Number of ordinary and overtime hours worked
Number of hours worked on a Sunday or public holiday
Total number of ordinary and overtime hours worked
Why is your payslip so important?
First, your payslip is proof of your employment, both your current job and your previous jobs. This is why you should not throw your old payslips away – you never know when you might need to confirm your employment history.
Second, because your payslip states your occupation, it is proof of the specific jobs you have done and how much you have earned in each job.
Third, your payslip is your receipt for the payment you received for the work you have done.
What you need to check on your payslip
Make sure that your normal time and overtime rates are the same as in your employment contract or your latest salary adjustment letter. If you have been underpaid or overpaid, inform the HR department immediately.
Check that the number of hours you are paid for, is the same as the number of hours you have worked. This is particularly important for overtime. Again, if there are any differences, talk to HR without delay.
Every few months, make sure your personal details are correct, as well as your employer’s details. Even a spelling mistake in your name can cause big problems when you submit your payslip when, for instance, you want to borrow money.
Make sure that your personal or voluntary deductions are correct, and that they do not add up to more than 25% of your gross pay. Although your company’s payroll department is supposed to check this, you are ultimately responsible for your own finances. For instance, if the garnishee orders against your salary are more than 25% of your earnings before deductions, you have to take this up with the payroll department. By law, your company has to help you manage the situation.
Check that your leave days – available days and days you have already taken – correspond with your own records. Any mistakes must be reported to HR.
Confirm that your pension or provident contributions were deducted correctly, as well as your UIF payments. By law, your company contributes 1% of your salary to the Unemployment Insurance Fund, and you contribute 1%. At the end of the tax year, your IRP5 certificate must show that your UIF contribution was paid over to the Department of Labour.
How to use your payslip as a financial wellness tool
The first and most obvious point is that your payslip tells you how much money you take home at the end of the month. You need this information to draw up your budget.
Use the fixed and variable income items to guide your budget. Fixed income is your basic salary; variable income are items such as overtime, bonuses and incentives. Your goal should be to budget according to your basic salary, as that is the only income you can be sure of. Overtime, bonuses and incentives depend on circumstances and you cannot be sure that you will earn this extra money every month. It is therefore wise to cover your basic needs with your basic salary, and to save at least some of your overtime and bonus money for emergencies and for achieving financial goals, such as paying school fees upfront, renovating your home, buying a vehicle or taking your family on holiday. Furthermore, if your budget clearly shows that you need at least some overtime to make ends meet, you can plan upfront to put in the extra hours.
The deductions on your payslip are significant financial wellness indicators:
Pension or provident fund deductions show that you are making some provision for your retirement. Once a year, ask a financial advisor to help you understand if you are putting away enough money. If not, rework your budget to increase your retirement provision by as much you can. Importantly, never cash in your pension or provident fund when you change jobs – providing for your old age is critical for financial wellness.
Take a close look at your voluntary deductions, such as union fees, your company’s gym or social club, or donations to charities managed by your company. Do you really want to make these contributions, and do you really use the services you pay for? It is good to ask yourself these questions from time to time to make sure you don’t pay for things you don’t need.
Make sure there are no duplications. For instance, if your employer deducts money for you to belong to a company insurance scheme, do you still need your own life insurance or funeral cover as well? Make sure you understand fully what benefits you have as an employee, and adjust your private cover accordingly.
Deductions for loans are red lights, whether they are for garnishee orders or for advances you take against your salary. If loan deductions are a regular feature on your payslip, it means that your debt is out of control. Instead of taking another loan, rather ask your HR department for help, or consider taking out a personal loan to consolidate your debt. If your employer cannot help, ask a credit provider, such as Bayport, for advice with managing your debt.
As you can see, your payslip contains a wealth of information that you can use to make better money decisions, improve your budgeting and get on top of your debt. Together, these steps will set you on the path to financial wellness.