Starting a new job in an employee’s career is usually an exciting event with the additional prospect of increasing their earning potential in most cases.
With the evolution of payroll systems over the years, it is natural to accept that there should not be any discrepancies between what an employee has been offered and what he receives when they obtain their first payslip.
Differences in net take home pay
Unfortunately, it is not that uncommon for new employees to be faced with a different salary package at the end of their first month than the one they were initially promised as part of the recruitment process.
The general practice during the recruitment process is to present the prospective employee with a ‘dummy payslip’ as an indicator to what the employee can expect in their net take-home pay.
Ultimately employees are mainly concerned about what will be deposited into their bank accounts after all their deductions which include statutory taxes have been made. It therefore can cause a major break in trust if what has been presented in the dummy pay-slip and the offer letter is not fully aligned in the employee’s first payslip they receive.
In-house package structuring tool not aligned
The discrepancies may be attributed to the use of an in-house package structuring tool that has not been configured properly, or the tax treatment of certain benefits which have been calculated incorrectly.
This problem is further exacerbated in an environment where there are flexible benefits structured into the employee’s package whereby an employee wants to see what the impact is on his take-home pay if he selects different benefit options.
This in effect means that the payroll department will have to run multiple dummy pay-slips to show this impact to the employee’s net take-home pay based on the employee selections made. This can be time-consuming and an additional administrative burden on payroll department.
In addition, companies should ensure that the pay-slip design is simplistic and easy to understand. The payslip should tie back to the offer letter prospective employees receive to minimise additional queries and create further mistrust.
Fixed package structure
It is also important to note that employees who receive fixed packages i.e. – a fixed basic salary and benefits which remain constant throughout the tax year – should not be faced with fluctuating Pay-as-You-Earn amounts and a different net pay from one month to the next.
It is only when the employees earn variable amounts in addition to their fixed packages should there be a fluctuation in net pay and PAYE.
If this is not the case, it will be necessary to do an analysis of the payroll to find the specific reasons for these discrepancies.