For many employees, the figure that counts is net take home pay. However in the changing world of work, net take home pay does not capture the full pay deal. An appreciation of the pay variables are as important, if not more, than career development. Your financial, work and lifestyle decisions are inextricably related to pay.
Pay variables may be broadly divided as follows:
Macro Variables include the economic, labour, regulatory, legal and tax elements. These variables regulate or influence the decisions of employers and benefit providers. For example, CPI or CPIX is often used by employers in the computation of annual performance increases. Macro variables also establish a framework for employee segments by sector, profession and income level. Employees undertake work and pay decisions having regard to the macro variables but cannot directly change them. You can’t change the marginal tax rates applicable to your income level!
Micro Variables arise from the employment relationship. It includes the organisations’ pay philosophy, policies, remuneration model, incentive schemes, benefits provision and pay documentation. Micro variables impact on your pay stream by attaching conditions, time periods and risk. A common example is the use of total cost packages to transfer retirement and healthcare risks to employees. The success of your work and pay decisions depend on a proper assessment of the micro variables.
Getting to grips with pay involves four steps
• Awareness of trends and developments on the pay front.
There is ample information in newspapers, financial magazines and on internet sites. Other sources include industry publications, employee forums, recruitment agencies and professional colleagues from other organisations.
• Review the micro variables.
Start with your monthly payslip. Each earning, allowance, benefit, contribution and deduction has a source that can be investigated.
• Ask questions.
The HR and payroll department can assist in clarifying legal jargon, terms & conditions and the basis of computations.
Use the insights and information in pay related decisions. You could furnish the information to your financial advisor for planning purposes; use it in pay negotiations or effect changes in your benefit selection.
At the end of the day, your pay is at stake and knowing it well is in your best interest.
(Star Workplace, 2004)
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