Smartwage shares what is being deducted from your payslip and why

Here’s everything you need to know about your payslip.

By Caroline van der Merwe, Industry Expert at Smartwage.

A payslip is one of the most important pieces of paper in your life – it not only provides proof of employment, but without it, you’ll have a hard time applying for a bank loan, a phone contract, a rental agreement and a home loan.

The Basic Conditions of Employment Act states that funds from your salary may only be deducted if you have signed an agreement with your employer and they are legally allowed to do so.

So what legal deductions can be made each month and how can you be sure the right amount is coming off? SmartWage has put together a breakdown of everything you need to know about your payslip:

What should your payslip look like?
All payslips will look slightly different, but they should all contain the following details:

  • Your name and surname
  • Your employer’s name and address
  • Your ID number, job title, staff code or employment number
  • The period for which payment is being made
  • Your total salary
  • The number of ordinary and overtime hours worked
  • The number of hours worked on a Sunday or a public holiday
  • Any deductions
  • The actual amount that will be transferred into your bank account

Glossary of Key Terms:
Basic salary: Your basic salary refers to what you earn without benefits or bonuses.
Gross salary: Your gross salary can be defined as the amount of money you are paid before taxes and deductions are discounted.
Net pay: Net pay is also referred to as your take-home pay. It is the amount you see in your account after all the deductions.

What are voluntary/personal deductions?
Voluntary deductions include staff loans, donations to charity and union fees. It is important to remember that your personal/voluntary deductions cannot exceed 25 percent of your gross pay (this is the money you have earned before deductions).

If staff loans are one of the largest deductions on your payslip, why not try SmartWage? SmartWage allows you to get access to your earned wages before payday, so that instead of asking your employer for a loan, you can use your own money to help you make it to the end of the month. Ask your employer to offer SmartWage.

Additionally, deductions related to benefits such as your pension, medical aid and life cover are most often voluntary. However, these deductions can be ‘compulsory’ (read on to find out more), depending on your employer’s policy. If you haven’t already, find out from your employer what their compulsory deductions include.

What are compulsory deductions?
Compulsory deductions include tax and Unemployment Insurance Fund contributions (UIF). To ensure that your employer is paying these two amounts over to SARS and the Department of Labour you must check your IRP5 certificate that is issued at the end of a tax year.

Paying into the Unemployment Insurance Fund is important because if you lose your job, go on maternity leave or become sick, you will be able to apply for funds that will help to provide short-term financial relief for you and your family.

Should you pass away, your dependents will also have access to these funds. Your contribution to the UIF should make up two percent of your gross pay. You and your employer will each contribute one percent towards this fund each month.

How does Pay-As-You-Earn (PAYE) work?
‘Pay as you earn’ (PAYE) is the amount your employer deducts from your salary to pay SARS each month. What it means is that you pay tax every month instead of all at once at the end of the tax year, hence the name ‘pay as you earn’.

PAYE is often a much more manageable way to pay tax, as it saves you from having to pay anywhere between 18 percent and 40 percent of your earnings (the taxable amount) to SARS in cash as a lump sum at the end of the tax year.

The amount you must pay per month will depend on how much you have earned and it is calculated using the tax rates issued by SARS. Here is how: 

When your employer calculates the amount to PAYE (i.e. tax) on your behalf, your earnings get multiplied, depending on how often you get paid, whether that is monthly or weekly, to give you an annual earnings amount.

This amount is then applied to the SARS tax tables and the corresponding amount (on the tax tables) is then divided again by the same work period that was used to work out your annual earnings, to get your monthly PAYE tax. This is then withheld, displayed on your payslip and paid over to SARS. It is important to remember that if you have only worked part of a tax year, you may be able to claim a tax refund because of how the PAYE is calculated.

What are Garnishee orders?
A garnishee order, also known as an emoluments attachment order (EAO) is a debt deduction. In other words, your employer might be tasked with paying your creditors on your behalf if there is a court order that requires them to do so. 

Do you need to submit a tax return?
You do not need to submit a tax return if your taxable  income for the year is not more than R500 000, you have no other form of income or other tax-related deductions to claim for, and you only receive an income from one employer for the full tax year.

What should you do if you think there is a mistake with your payslip?
If you’ve read through our breakdown and you think your payslip may be incorrect then don’t be afraid to speak up. Take your payslip to the HR department and voice your concerns. Mistakes can happen and they won’t be able to fix them if you don’t let them know.