Job offer? Here’s how to avoid nasty surprises come payday

WHETHER you are at the offer stage for a position you've applied for at another employer, looking at the first job offer straight out of studies, or in the process of being offered a promotion as an internal candidate for a job, if you don't know the ins and outs of a compensation package, you may well be disappointed come payday. It's easy to be impressed by the healthy sum you are offered as your cost to company (CTC), but before you break out the bubbles, get the lowdown on what exactly will be hitting your bank account on payday, employee benefits, and how to negotiate and compare offers.

Defining cost to company (CTC)

Your CTC is calculated by combining the cash amount, fringe benefits and employer contributions an employer is willing to spend on you over a specified period. “Historically, the majority of South African companies used the gross remuneration concept, where employees and unions were more focused on negotiating cash payable to them instead of intangible benefits,” notes Given Seolwana, managing director of VHG HR and Payroll Consulting. She credits the competition in the global job market for the CTC concept having gained momentum here, and explains that it has benefits for employees that its predecessor didn't offer.

“An employee has the flexibility to choose their salary components that best suit their needs,” she says. For example, if you don't need medical aid because you are already on your partner's scheme, that amount would be ‘put back' into your salary. With salary increases, calculations are also based on your CTC, not on your basic salary (as would've been the case using the gross remuneration model). Seolwana says, however, that she has seen a rise in employers reverting to making pension or provident fund and medical aid benefits compulsory so that in difficult times all employees are covered.

Your employee benefits

“Fringe” benefits are any non-cash benefits your employer grants you, while company contributions are costs covered by your employer on your behalf. Examples of the latter are a skills development levy, contributions to your unemployment insurance fund (UIF), medical aid, retirement fund and risk cover.

Zooming in on retirement contributions, Seolwana labours the importance of fully understanding where your chosen pension or provident fund contributions are actually going. She says: “You may expect full contributions to accrue to your retirement savings, but this is not correct, because provident or pension funds normally have a portion of the amount going into group risk benefits and admin fees.” So, when it comes to selecting your deduction, it helps to ask to see a mock payslip to truly get a sense of what's going towards your savings.

The same goes for medical aid, should you opt to get it through your employer.

“Although most companies might offer a 50% contribution on medical aid, most of them have a limit, and before deciding on which medical aid plan you wish to take, it is recommended that you find out if there is a cap on medical aid contributions, so you can be certain that you can afford the plan you picked,” says Seolwana.

Fringe benefits can include housing, company vehicles, mobile devices, fuel cards and more. These can vary across companies, and are worthy key considerations when assessing your overall offer of employment.

The right offer for you

Congratulations! You've been made an attractive offer by a prospective employer. But now is not the time to rush a decision. Most career experts recommend against immediately accepting and signing an offer, no matter how good it appears. Why? Because this is the point at which you can have a meaningful influence over what your package will be for the next couple of months at least, and whether it's in line with the true value you will bring to your employer.

Between 70% and 80% of employers expect candidates to negotiate job offers, so now is the time to research and decide on the figure that most accurately reflects fair compensation for your role and responsibilities.

“A lot of people do not do sufficient research into the new job and salary ranges, in order to understand their worth,” Seolwana points out. “There are now salary benchmarking apps available. You could also go to recruitment agencies' portals to get an understanding of what the market offers out there for the same position,” she adds. Understanding the entry level, median and high points will assist you in positioning yourself better. And if you're fortunate enough to be considering more than one offer at a time?

Pay attention to the baseline variables and what is of greater value to you at this life stage. For example, a childcare benefit could be useful for parents; an accommodation subsidy may be attractive if you would have to relocate for the job. It all comes down to your needs as much as the organisation's needs of you.