06 Dec Demystifying Salary Terms: Gross Salary, Net Salary, and Cost to Company
Demystifying Salary Terms:
Gross Salary, Net Salary, and Cost to Company
Navigating the world of salary packages can be confusing, especially when faced with terms like gross salary, net salary, and cost to company (CTC). It is one of the reasons why recruiters will request a copy of your payslip during the employment process. In this blog post, we’ll break down these terms simply to help you understand the differences between them.
Gross Salary:
Gross salary is the total amount of money paid by an employer to an employee before any deductions are made. It includes all components of the salary package such as basic salary, allowances, bonuses, and any other benefits. This is the amount agreed upon by the employer and employee, and it serves as the starting point for calculating other salary components.
Net Salary:
Net salary, also referred to as take-home pay, is the amount that an employee receives after all deductions have been made from the gross salary. Deductions may include PAYE, provident fund contributions, medical aid, and any other deductions mandated by the government or the employer. The net salary is what actually lands in the employee’s bank account and is available for personal use.
Cost to Company (CTC):
Cost to Company (CTC) is the total cost incurred by the employer in employing the individual. It includes not only the employee’s gross salary but also other costs borne by the employer on behalf of the employee, such as contributions to provident fund, medical insurance, bonuses, travel allowances, UIF, Skills Development Levy and any other benefits. CTC gives a comprehensive view of the total expenses associated with hiring an employee, beyond just the basic salary.
In essence:
Gross Salary is the total amount agreed upon as compensation before any deductions.
Net Salary is the amount an employee receives after deductions and is the actual take-home pay.
Cost to Company (CTC) is the total cost incurred by the employer in employing the individual, including all benefits and allowances.
When looking for a new position, it is important that while you may be concerned about the Net Salary, the employer will always be concerned and offer you a Gross Salary. It is always important to ensure that you are talking about the same thing to avoid disappointment and misaligned expectations when an offer is made.
