My granny often cautioned me: “Child, the devil sits in the details. Whenever you are faced with a decision in life, make sure you did your homework, gathered all the relevant facts and compared apples to apples.”
As a talent professional these words haunted me many a time, when I had to deal with candidates in despair after receiving offers lower than their current earnings or significantly below their expectations, sometimes without consideration for pending bonus pay-outs and potential losses of shares and incentives. Unfortunately, the blame cannot be passed to the company extending the offer, but is rather a cause of the candidate’s failure to present proper details regarding their salary structure and all quantifiable benefits forming part of their employment contract at their current organisation. Furthermore, applicants have unrealistic perceptions of standard increases provided by their specific industry, resulting in impractical expectations of 20%-40% package increases when changing jobs.
A critical aspect of your job seeking journey revolves around numbers: current package details and candidate expectations versus actual offer values received in the end.
ONCE UPON A TIME, NOT ENDING IN HAPPY EVER AFTER
Have a look at the following candidate stories taken from real incidents that transpired during previous offer processes:
- Sally earned R34 000 per month. In her interview, she stated this figure as her total monthly salary and Company X offered her R37 000 per month. In the end, Sally decided not to take the offer, as the nett salary in her bank account with Company X was going to be far less than the R34 000 she is receiving now.
What happened here? Sally provided her current nett salary of R34 000 in the interview without clarifying that this was the amount she receives in her bank account at the end of the month and Company X assumed she was referring to her Total Cost to Company being R34 000.
- Nico was on a Total Cost to Company of R 700 000 per annum, which he stated as his current remuneration figure during the interview. Company Z offered him a package of R 800 000, but when Nico inspected the dummy payslip, he realised that his indicated take-home pay, should he accept the offer, would be less than what he is currently receiving in his bank account.
What happened here? Nico was on a “Benefit Light” package where he did not receive any company benefits apart from a Medical Aid. Company Z has a well-structured “Benefit Heavy” offering, which includes Medical Aid, Pension Fund, Provident Fund and Group Life Benefits, which forms part of the Total Cost to Company Figure. Due to these added benefits in the new package, the proposed Basic Salary turned out to be considerably less than Nico’s current Basic Salary.
- Mohamed worked for a Bank and earned R 800 000 per annum as his Total Cost to Company He received an offer from Company Y in the manufacturing industry for R 1 000 000 per annum, which on the surface, seemed like an excellent package increase of 20%. However, Mohamed turned the package down after discovering that he will lose his Staff Rate perks if he left the Bank.
What happened here? Mohamed had a home loan, as well as vehicle finance at the Bank he was employed by, which entailed considerable interest savings on his two loans to the value of R 200 000 per annum. If Mohamed decided to leave the Bank, his Staff Rates would have been forfeited resulting in the R 200 000 per annum interest saving being added as an additional expense to be paid from his Nett Salary, effecting decreased Nett Gain of R 200 000 per annum.
- Charlene earned R 20 000 per month Total Cost to Company. In her interview, she was asked about her Total Cost to Company Package per annum, and she calculated the annual value as R 120 000. Company A offered her a package of R 140 000 per annum, but when she crunched the numbers from the Dummy Payslip, she realised that there was, in fact, no increase and she declined the offer.
What happened here? Charlene forgot to inform Company A that she received a guaranteed 13th Cheque which then increased her package to R 140 000 per annum, the same amount as the offer extended to her.
- Sipho worked for Company B, a large mining conglomerate and earns R 50 000 per month Total Cost to Company as indicated on his payslip. He sent the payslip to Company B after his interview process and assessments concluded, and Company B extended an offer of R 60 000 per month, Total Cost to Company. Sipho worked in a remote area at that stage and for the new role he needed relocate his family to the city. On the surface, it appeared as a great offer with an increase of 17% in total earnings, but Sipho made the decision not to accept the opportunity.
What happened here? On closer inspection of the Letter of Employment and corresponding Dummy Payslip, Sipho realised that Company B did not offer any housing. The organisation he worked for provided free accommodation for him and his family. If Sipho accepted the offer and moved to the city, he would be required to rent a house at the cost of R 12 000. That extra expense of R 12 000 would have decreased his Nett Gain, as he would have to pay rent from his Nett Salary going forward.
Many a job offer has gone pear-shaped due to a lack of clarification when discussing salary numbers with a hiring manager or the fact that applicants are unaware of all the components forming part of their salary packages.
SPANNERS IN THE WORKS
Understanding the full scope of your remuneration package is of utmost importance when engaging with a prospective organization in an interview process. Furthermore, you should be aware of the timing issues around resignation periods, which could impact on certain payments or benefits being forfeited. As an example, very few companies will pay out bonuses due during a resignation period, and shares and retention payments are voided automatically, when you leave the organization.
Another hurdle to consider is payback amounts for exams or professional subscriptions covered by your organization on your behalf. Review your contract carefully regarding these issues, as you will be held liable to reimburse the organization for these funds upon leaving their employment.
Be mindful of the type of remuneration package you are currently on and the variance in benefit offerings between your current package and the new offer. A “Benefit Light” structure where only one benefit exists like for instance a medical aid is very different to a “Benefit Heavy” format, consisting of multiple benefits like medical aid, pension fund, and group life insurance. The most significant impact between these two is the Nett Value paid into your bank account. With a similar or even higher Total Cost to Company, a “Benefit Heavy” package may result in a lesser Nett Salary than a “Benefit Light” structure.
GETTING TO KNOW YOUR NUMBERS
Total Cost to Company, Gross Salary, Nett Package, Nett Gain, Company Benefits! Are you confused right now? What are you really earning? The degree of variance in Payslips from one company to the next is substantial and often difficult to understand.
Look out for our next blog where we will be discussing the various remuneration components reflecting on payslips, hidden quantifiable earnings as part of an employment contract, as well as once off and infrequent payments not reflecting on your payslip every month. We will also then tackle the issue around salary expectations and provide guidelines on the realistic calculation thereof.
Once you know the intricate details of your Payslip and Employment Contract, deriving expectations becomes a lot simpler and the ride on the Remuneration Rollercoaster much easier to stomach.
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