By Louise Fairsave, Contributor 
This article continues a series that addresses the basic foundation block of financial success - earning. The series provides an opportunity for all readers to examine their current means of earning and the congruence of their choices with the objectives and goals that they have set for their lives.
Net pay
As an employee, whenever you receive your pay, it is required by law that you are provided with a pay slip which reconciles your net pay with your gross income. Some employers provide such a slip as a matter of course. Your pay packet will also include a pay slip showing the deductions.
Some employers arrange to pay direct deposit to the employee's bank account. In such cases, the pay slips may be handed to the various employees or the employee may visit the payroll section to collect the pay slip.
Other employers may only provide a pay slip when there is a change in remuneration, or if the employee specifically asks. The onus remains on the employee, no matter what the employer's preference is, to ask for a pay slip. As long as a pay slip is requested, it must be forthcoming.
Watch your
deductions
A key rule of managing your earnings requires that you, as an employee, are absolutely clear why and how each payroll deduction is made. In addition, you must be patently aware of the benefits that result from each deduction. After all, each deduction represents a payment to another party.
Certain deductions are compulsory. For example, it is required by law that every employee contribute to the National Insurance Scheme, and that employers withhold income taxes payable at the point of payment.
National Insurance
Are you aware of the rules that govern the quantum that is deducted from your gross pay? Do you know the quantum and range of benefits to which you are entitled as a result of the amount paid into the scheme? Are you aware of the timing and amount of the last change in rate? When last did you make a claim on the scheme? Are you aware of how this scheme interacts with the company's pension scheme? What are the periods that you are not required to contribute to the scheme?
It is estimated that less than ten per cent of the workforce can answer these questions accurately and comprehensively. However, this is a fundamental use of your pay that you must be entirely familiar with. The National Insurance Department provides a handbook which clearly set out the objectives and rules of the scheme, how it operates and the benefits available.
Similarly, most employees just accept the 'inevitability' of taxes without trying to understand the computation or the implications. Yes, pay as you earn, PAYE, deductions are required by law, yet many employees have significant unused influence on how income tax is applied. It is also important that employees can assess the reasonableness of the tax that is deducted.
Group health
It is possible for an employer to initiate a group health insurance scheme for the benefit of employees and near relatives. This typically provides access to insurance coverage at a much lower cost than if the employee seeks an individual or family plan.
The employers' plan may require the employee to contribute to the cost of the coverage (such a plan is called a contributory plan) or the employer may agree to meet the full cost. This would be a non-contributory plan. For a contributory plan, the employer usually arranges for the employee's share of the cost to be deducted through payroll. If the plan is not a compulsory plan, the employee may opt out of the plan. However, employees should be careful not to be foolhardy in trying to save on a deduction that can be essential when there is a health crisis. The benefits of the plan will need to be carefully evaluated in this context.
It is important to point out that health insurance is not to be readily dismissed just because the annual deductible on doctors' visits is high. Numerous visits to doctors for routine ailments has hardly ever run anyone into bankruptcy. However, major illnesses and surgical requirements can bankrupt even the employee of reasonable means.
So, unless, there is some other more economical way of ensuring health insurance coverage, it does not make sense to opt out of a cost effective group plan. Just keep tab on the plan by reading the handbook and understanding the coverage and the likely benefits.
Group life
Very similar to group health scheme (and sometimes an integral part of the group health scheme) is group life insurance coverage. An employer may be able to provide cheaper access to life insurance than the individual employee can. Furthermore, employers tend to operate these schemes as non-contributory. Employees are typically insured for once or twice their annual basic salary. Even if there is no deduction for this benefit by your employer, please check on its availability for personal estate planning purposes.
Group pension scheme
Employers may also operate group pension schemes for employees. Most employers in the private sector operate these as contributory schemes. Two fundamental clarifications employees should seek are whether the pension plan is integrated with the National Insurance Scheme, and whether it is a defined benefit plan or a defined contribution plan. Understanding and planning pension is a critical enough topic in today's context to be worthy of a separate exploratory article which will follow in this series.
Employees can also initiate deductions from their pay packet by signing an agreement to have such deductions made. For example, a mortgage company or a personal banker may stipulate that a condition of granting the loan is the requirement that the employee signs such an agreement. Employees may also give similar written instructions to the payroll officer(s) to settle say, the cost of insurance premiums, share contribution or loans to credit union, subscription to a public company or a mutual fund, and refunds/payments to the employer on the employee's behalf. It is within the employee's authority to request a myriad of different deductions. However, there are certain limitations on the amount that can be deducted and sometimes on the number of deductions allowed.
Next week this series continues on this topic of the importance of keeping tabs on deductions.
Louise Fairsave is a personal finance advisor. She can be contacted at louisfairsave-@nationnews.com.
