Job seekers - those who want to switch companies or occupations - should analyse all the components of a ‘cost to company' package when they study the compensation offer. Too often, interviewees are swayed by the total salary package, as it appears to be much more than anticipated. A lack of understanding often causes great disappointment at the end of the month when the amount in the bank account differs to the amount agreed upon.
Viv Gordon, of the recruitment agency Viv Gordon Placements, says the term ‘cost to company' - in other words the total guaranteed package that it costs the company to employ someone - has become popular over the last four years. Many firms use it in their negotiations with prospective employees. As it includes all costs, the total amount has more of a lure.
“Prospective employees often get confused between cost to company (CTC) and Nett because they don't like to talk about money and think that they will be netting what the company offers as CTC. They simply don't understand the difference between CTC, gross and nett.”
Cost to company may typically consist of basic salary; company contributions to medical aid, pension fund, UIF, SDL, group insurance, 13th cheque and bonus; use of company property such as car, petrol card, computer and software; loans, bursaries and interest free or low interest loans, insurance, telephone at home, cost of share options, incentive schemes and even parking.
“Initially cost to company packages allowed employees to structure their salaries more tax efficiently. Now that SARS has clamped down on fringe benefits such as car, cell and entertainment allowances, no real tax benefits remain, although CTC packages still give prospective employees a little flexibility on how much they will nett at the end of the month,” Gordon explains.
To be able to do this, job seekers need to be properly prepared when interviews reach the salary stage.
“They should insist on the details of benefits and once offered the position, either sit down with the company's payroll administrator or ask for a ‘dummy' payslip. This would give them an approximate indication of what they will be netting at the end of the month and serve as a comparison to their current nett earnings,” Gordon advises.
One of the benefits of working with an agency like hers, is the agency will do all these negotiations on behalf of a prospective employee, provided the agency gets a proper appraisal of exactly how the employee's current package works. “We do require his or her current salary slip to see how the package is structured, to ensure that, when the new offer comes through, the employee will be taking home what he or she ideally wants.
“Working within the creative industry we find that creative people in particular often don't know what they are earning. All they know is what goes into the bank at the end of the month. If we negotiate on a client's behalf, we get the company's offer in writing, analyse it and explain the details to our client. We can also prepare the candidate for a meeting with the financial manager, so that the candidate can walk out properly informed about the flexibilities with regard to elements like medical aid as a basis for the ultimate decision.”