14/10/2026
You’ve found the right person for the job, they’ve accepted your offer, started working and then payday arrives. They receive their first payslip and come to HR asking, “But I thought I was earning R20,000 a month?” They’ve looked at their employment contract, seen a Cost to Company (CTC) package of R20,000, and then looked at their payslip and wondered why the figures don’t add up, and questioned whether they have been underpaid.
The employer has usually not underpaid them, but there is a misunderstanding about what Cost to Company actually means.
What does R20,000 CTC per month actually mean?
Cost to Company is the total cost to the employer of employing that person. Depending on the package, it can include the employee’s salary as well as employer contributions towards benefits.
For example, a R20,000 CTC package could look something like this:
• Basic salary: R17,500
• Employer retirement fund contribution: R1,500
• Employer medical aid contribution: R1,000
In this example, the employee’s gross salary is R17,500, not R20,000. Their take-home pay will then be affected by applicable deductions, such as PAYE, UIF and any employee contributions towards benefits.
To avoid this type of confusion when an employment offer is made, it is not enough to simply state the CTC figure and expect the employee to understand what it means. The breakdown needs to be explained clearly, including what constitutes salary, what benefits are included and what deductions the employee can expect.
After spending considerable time finding the right person for the job, the last thing an employer wants is for their new employee to feel misled or believe they have been underpaid before they have even settled into their role. We often focus on the impression an employee makes during their first few months, but the employer is also creating an impression. Something as simple as not explaining a remuneration package properly can leave an employee feeling frustrated and disillusioned at a time when we want them to feel positive about their new role and their decision to join the company.
For employers and HR practitioners, make sure employees understand their remuneration package before they sign their contracts. For employees, don’t be afraid to ask questions if you are unsure what your offer includes.
