Remuneration
Structuring a remuneration package
Package structure decides how the same rand of cost is experienced by the employee, taxed by SARS and reported in your accounts. Good structures are simple, consistently applied and defensible.
The building blocks
Guaranteed pay
The fixed portion the employee can rely on: basic salary and any fixed allowances forming part of the package.
Variable pay
Performance bonuses, incentives and commission, tied to defined measures. Variable pay is taxable when paid and should be modelled for its PAYE impact in the month it falls.
Benefits
Retirement funding, medical scheme and risk cover, split between employee and employer portions — administered through benefits administration.
Flexible structures
A flexible package lets employees allocate a fixed total between components within policy limits — for example, a higher retirement contribution instead of a higher cash salary. Flexibility is valuable, but it must be bounded, documented and re-elected on a defined cycle rather than changed at will.
Tax consequences of structure
Different components attract different tax treatment: travel allowances have a prescribed inclusion rate, retirement contributions are deductible within limits, and fringe benefits carry valuation rules. Structuring for tax efficiency is legitimate; structuring to disguise remuneration is not. See PAYE for how the calculation follows the structure.
Implementing structure in payroll
- One earning code per component with the correct tax and source code mapping
- Employer and employee portions of every benefit reported separately
- Effective-dated changes so mid-year restructures calculate correctly
- Payslips that make the structure legible to the employee
Frequently asked questions
What is a remuneration package structure?
It is the way a total package is divided between guaranteed cash, variable pay, allowances and benefits, together with the rules governing how much may be allocated to each component.
Can employees choose how their package is structured?
In a flexible package model, yes — within policy limits and on a defined election cycle. Unrestricted changes create administrative and tax problems.
Does package structure affect tax?
Yes. Allowances, fringe benefits and retirement contributions each have their own tax treatment, so two packages of the same cost can produce different net pay.
How often should package structures be reviewed?
At least annually, alongside the tax year and the increase cycle, and whenever legislation changes the treatment of a component.
Patuza models structures for tax treatment, employer cost and employee outcome before you roll them out.
Book a consultationRelated services
- Payroll advisory →
Payroll consulting on process, controls, systems, compliance risk and payroll optimisation.
- Employee benefits administration →
Medical aid, retirement funds, group risk and allowances administered through payroll.
- Payroll processing →
Monthly and weekly payroll processing, calculations, payslips and statutory deductions.
Related topics
- Total remuneration →
Total cost to company: how guaranteed pay, benefits and employer contributions add up.
- Benefits & allowances →
Travel, cellphone, medical, retirement and other package components and their treatment.
- Net pay →
How take-home pay is derived from gross remuneration, deductions and tax.
- Remuneration →
What remuneration means in South African payroll, tax and employment practice.
Related insights
- Remuneration structuring guide →
Structuring packages for value and compliance.
- Benefits and allowances in a package →
How each package component is taxed and what that means for the employee.