Kenji Blog

Here I want to share an old story about one of my colleague. He only paid about USD 250 a month. Pretty low wasn’t it, but its quite decent in Indonesia. One day he moved out to get his fantastic offer USD 350 a month. its almost 50% higher than our average wage so he mocked up others and said goodbye just only for a few months. Then… he got out.

He said that when he started working there, he kept losing his money. In his new company, he was appointed as a manager which demanded him to work longer than normal working hours without any Over Time (OT) rate. The other thing that he forgot to calculate about was his cost for his transportation. His new place was more far away than ours to his home. It took some time before he realized that actually he had to work longer and had to pay more expense in his work.

I think this is common issue in job market and I bet you have similar story from your company. People are easily lured out to other places only by maybe 10-20% higher wage, then they want to get  back again after they are realized that they get less money then before.

This kind of situation happen because most people don’t understand about their salary or perhaps they just don’t put enough concern about it. Its not about gross or net salary or take home pay, what I want to say is about the component of payroll and the cost for the work.

Knowing Your Salary

The best time to know how much your actual salary is when you are just before signing your contract with the company. Every company or organization has their own approach in offering your contract so don’t expect that everything will go the same way as before. Its important to ask them about your remuneration break down.

Some company, perhaps only the personnel not the company, might not present your contract clauses clearly in order to make you mis-perceive the actual remuneration. One of the common practice is that they present you the cost to company not your salary. Cost to company is the sum of expense the company will have to spend when they employ you. Cost to company is different from gross salary, so don’t take them as the same.

For example, 5 years ago I had a friend who just offered about $5000 a month from some multinational company. At the end of the first month he got only $2500 and so did at the end of the second month. He was mad and confused, so he decided to meet the management. This was the answer he got that time

You get $5000 a month, but I will have to deduct about $1500 for the running first year. The first $500 is for covering the cost of recruitment we have got in order to get you in here. Another $500 again for the cost of job orientation and training that you just got last month. The last $500 is deducted from your salary is just for the id card, uniform, notebook, and other equipment that you might use. And we pay $1000 to insurance company just for your satisfaction. So your take home pay is about $2500. Is there anything else you want to know?

That’s about the words he said to me that time, although not 100% the same words. but this is what you might get if you are not paying attention when negotiating your contract. Ok, lets get back to our main topic

Salary Structure

Because each company has their own remuneration or payroll system, so there isn’t any exact formula to describe the component. But here I try to make this one simple by categorized them into 4 sections.

Basic Wage

This is the fixed part in your compensation. Only freelancer and position which get paid only bt full pay on performance system do not have this one. I do not have to say anything more, because I am sure you already know this part.

Allowances and Benefits

This is the part that each company varies a lot, and due of that we hardly can make an apple to apple comparison between one place to another one. Let’s take a quick sneak peek for each of them.

Each company has different regulation in determining the limit of medical allowance of their employees. Not only the limit, but the coverage too. Some company only cover the employee only, not the employee’s family. Dental allowance and maternity allowance are usually separated from medical allowance. These three allowance are not paid cash to you but somehow they play big part of your finance.

The second most important thing you should review in allowance is the car/vehicle allowance. Some companies differs this one from travel allowance and some other included in that. Travel allowance is the sum allowed for travel (rev: princeton university). Be aware if you are offered a lump sum bases or fix rate, because your actual cost for traveling might exceeds a lot from the given fix rate one.

There are a few other allowance that haven’t mentioned here, but I think those are mentioned are the most common one you could easily recognized.

Performance Bonus

This is additional compensation or bonus you get when you achieve your performance target. Some company gives flat rate such as additional one month basic wage or something else it exceeds its annual target.

Before I worked in my current company, I was offered a position where it has up to 10 months salary as its performance bonus. It was a fantastic offer but I had to pass it out due to some reasons and the main reason was the basic wage that was way to low.

Tax

You have to know if the number in front of you is excluding or including the tax that you will have to pay. The bad thing is, people won’t put tax into the contract, so you have to calculate and estimate your own tax liabilities before. This is the section which can lead you to say wheter it is a Net (after tax) or Gross (before tax).

So these are what we should aware about in perceiving our salary. These are not all, there are still some other things that I might forget to put in. Do you have any input for this one? Or perhaps you have your own experience about this case too….

After this, I will post another one that will follow up my post here.