Pay and Benefits

With pay and benefits comes

Taxes

Types of Pay Salary: set amount of money

earned by an employee per year or fixed length of time.

What are the advantages or disadvantages of a set salary?

Types of Pay Wages : employee earning that are

paid by the hour, day or item. Piecework: wages based on the

number of items or pieces produced. Commission: a fixed percent or

amount given to employees In exchange for making a sale.

Types of Pay Some employees earn a commission

plus a salary Others work of straight commission. What are the advantages or

disadvantages? Tips: money earned in exchange for a

service

Equal Pay Fair Labor

Standards Act Includes equal pay

provisions that forbids employers from paying one person less for the same work.

Equal Pay Minimum wage: the lowest hourly rate

an employer may legally pay most workers.

Are Federal and State different in Illinois?

Should the minimum wage be raised? Does a city have a right to tell a company how much you should pay employees?

Equal Pay Overtime: in excess of 40 hours per

week overtime is usually paid at the rate of 1.5 times the employees regular rate

Overtime may be paid for anything over 8 hours

Salaried employees may be exempt

Types of Benefits Insurance benefits: health care

plans which may be paid for or available at a reduced cost

Health care is coverage for employees is seen as a problem for some employers. Why?

Types of Benefits Savings and retirement plans:

taxable or pre-taxed savings plans, retirement plans, employer contribution or matching plans

Vested: allows an employee to be entitled to part of or all of their money in a retirement plan. Ex: vested 20% per year

Types of Benefits Other benefits:

paid holidays, vacation, or sick time

Employment Classifications

Employment Classifications: Full-time: works hour of at least

35 hours per week. Usually can take part in employee sponsored benefit plans.

Part-time: employees who work less than 35 hours per week

Employment Classifications Temporary: employees hired to fill short

term assignments or additional work. Employees are usually paid by the temp agency and not the business

Contract: employees hired for a specified period of time to complete a project. Paid by the company. May or may not have benefits

Employment Classifications

Advantages of using temp or contract employees are:

1. change staff as needs change

2. May cost less in benefits, and training

3. Can be used as a trial period before hiring for permanent position

Your Paycheck Many companies pay every week,

every two weeks or even twice a month. Some use

Direct deposit: an electronic transfer of funds directly into your account

Employees will receive a pay stub providing all payroll information

Your Paycheck Pay stub provides useful information

and helps keep track of your earnings.

Look at page 197 Why should you go over your pay

stub carefully each time you are paid?

Your Paycheck Gross pay: is the total amount of

money earned for working a pay period before deductions.

Deduction: anything that is subtracted from gross pay. Can include taxes, benefits, or retirement with holdings

Your Paycheck Tax withholdings: can include federal,

state, or local taxes. It may also include Social security: a federal assistance

program that pays retirement, survivor, and disability benefits

Medicare: federal program that helps pay medical expense for those who qualify

Your Paycheck Social security and Medicare

deductions sometimes use the abbreviation

FICA-Federal Insurance Contributions Act

If you remember what FICA means you will be only one of a few to know

Your Paycheck Net pay: the amount

of pay an employee is left with after taxes and other deductions are subtracted from the gross pay

Also known as “take home pay”

Income Tax Income tax responsibility according

to the IRS 1. Complete a W-4 form that allows

an employer to withhold income tax from your pay.

2. File a tax return at least once a year, and pay any additional tax owed

Income Tax W-4 Form-provides employer with your

personal information, exempt status, and allowances. Page 201

Exempt status-do not have to pay taxes if you expect to make too little income during the year

Allowances: factors that affect the amount of income tax withholding. The more withholding , the less tax.

Income Tax IRS-Internal Revenue Service: a

governmental agency in charge of collecting taxes.

Taxes must be file by April 15th of the following year.

You will need the following items before you file

Income Tax W-2 Form: an employer sends you

this form showing your total earnings, and total taxes deducted for the year

1099-INT: a form showing your earned interest income for the year in a savings account.

Income Tax You may also need IRS booklets and

personal and financial records. Filing status: is based on whether you are

married or single. It does affect the amount of taxes owed.

Exemptions: tax laws allow some income to be excused from taxes based on the number of qualified exemptions

Income Tax Dependent: someone who is

supported by a taxpayer’s income. Adjusted gross income: Income that

has been subtracted from total (gross) income

Tax deduction: reduces the amount of income that is taxed

Income Tax Two ways to take tax deductions 1. Itemized deductions: amount

actually spent on tax-deductible expenses Ex: Charity, church, mortgage interest

Why would the government allow you to deduct the interest on your home loan?

Income Tax 2. Standard deduction: set amount

the IRS allows without listing expenses or having receipts

Taxable income: the portion of your income that is actually subject to tax

Tax credit: amount subtracted from taxes owed ex: education, child care

Electronic Filing Consider filing

electronically through the IRS website

Your money is usually returned much quicker