Insights
Employer cost versus employee net pay
Employers talk about cost to company; employees talk about take-home. Both are correct, and the distance between them is entirely explainable.
Walking the gap
- Employer cost includes employer retirement and medical contributions, employer UIF, SDL and the COIDA assessment
- Those employer amounts never appear as cash to the employee
- From the cash portion, employee contributions to retirement and medical are deducted
- PAYE and the employee UIF contribution are then withheld — see PAYE
- What remains is net pay
Why the gap varies
Benefit-heavy structures widen it; cash-heavy structures narrow it. Medical scheme membership, dependants and retirement contribution rates all shift the outcome for two people on the same package.
Communicate both numbers
Employers who show cost to company and estimated net pay in an offer avoid the first-payslip conversation entirely. The Net Pay Simulator (NPS) produces both.
Frequently asked questions
Why is employer cost higher than gross salary?
Because employer contributions to benefits and statutory employer costs such as UIF, SDL and COIDA sit on top of the salary and are never paid as cash to the employee.
Can employees see the employer contributions?
Employer contributions should be shown on the payslip as employer-funded amounts so employees can see the total value of their package.
How can we reduce the perceived gap?
By quoting expected net pay alongside cost to company, and by showing the employer-funded components clearly on the payslip.
Patuza reports employer cost and net pay outcomes together.
Explore NPSRelated services
- Payroll reporting →
Cost, variance, management and reconciliation reporting from every payroll cycle.
- Payroll processing →
Monthly and weekly payroll processing, calculations, payslips and statutory deductions.
- Employee benefits administration →
Medical aid, retirement funds, group risk and allowances administered through payroll.
Related topics
- Employer cost →
The true cost of employment: contributions, statutory levies and cost beyond the salary line.
- Net pay →
How take-home pay is derived from gross remuneration, deductions and tax.
- Employee contributions →
What employees contribute to retirement, medical and statutory funds, and its effect on pay.
- Total remuneration →
Total cost to company: how guaranteed pay, benefits and employer contributions add up.
Related insights
- Understanding total remuneration →
How to read a cost-to-company offer and compare it fairly against another.
- How PAYE is calculated →
The annualisation method SARS expects, step by step, with the traps that distort it.