Pay, Benefits, and Working Conditions

Chapter 6

What is gross pay?Total amount you earn before any

deductions.Note – If you are hourly employee, any

overtime must be calculated into your gross pay.

Determine Gross Pay

Diane worked 40 regular hours and she gets paid $6.50 an hour. What is the procedure to determine her gross pay.

answer: $6.50 x 40 hours = $260.00

How many hours is a standard work week?40 hoursIf you are an hourly worker, any hours over

40 is considered overtime and is calculated at time and a half..

This regulation is stated by the Fair LaborsStandard Act

Calculate gross pay for Jim:Jim worked 45 hours in one week. His hourly

pay is $6.50 an hour. What is the procedure?

40 hours x $6.50 = $260.00 5 hours x $9.75 ($6.50 x 1.5) = 48.75 Total = $308.75

Let’s look at the pay stub on page 120.Notice the second slip at the bottom, you will

see an itemization of Mr. Smith’s deductions. You will see he had a gross pay of ? And a net pay of ? for one pay period. What about Year to date (YTD)?

What were Mr. Smith’s deductions?Federal Withholding Tax, OASD (Social

Security) Medicare, Other Deductions

How much has he grossed YTD?

Do salary employees receive additional pay for overtime? (Your gross pay will always be the same as your salary)

A salaried employee is often stated at an annual (yearly) amount. In this case, how does one determine amount of pay per pay period?

Take the yearly pay amount and divide it by the number of pay periods. If someone is paid monthly divide by 12 months.

Problem: Dan is paid monthly. What is his gross per pay period?

$24,000 divided by 12 months = $2,000

Some deductions are required and some are voluntary.

Look at the pay stub on page 120, where is Mr. Smith’s Other deductions going?

Credit Union, health Insurance, Union Dues, accidental insurance

Optional deductions may not be taken out withheld without your written consent except by court order. (federal taxes and social security are not optional deductions)

Regular wages plus OT = ?Gross Pay

Gross Pay less deductions = what?Net Pay

Required Deductions include:

Federal income taxState income taxSocial Security (OASD) (6.2% of gross)Medicare Tax (1.4% of gross pay)

EMPLOYERS MUST CONTRIBUTE MATCHING AMOUNTS INTO EACH EMPLOYEE’S MEDICARE AND SS ACCOUNTS.

Do people who are self-employed have employee deductions and withholdings?

No

Do they still have to pay Federal, state, and SS taxes?

YesHow do they do it?

Instead, they must file estimated tax returns quarterly with payments.

How do they determine the amount to file (to pay)?

They estimate a year ahead total tax owed and divide by four and make four payments throughout the year.

Self-employed people pay 12.4% of gross pay for Social Security (as compared to 6.2% for non-self-employed.

They pay 2.95% (1.45 x 2) for Medicare Tax.THE GRAND TOTAL (15.3%) IS CALLED SELF-EMPLOYMENT TAX.

PROFIT SHARING

Employees receive a portion of company’s profits at the end of the corporate year. This can be considered as Incentive Pay. Money offered to encourage employees to strive for high levels of performance.

Paid Vacations and HolidaysGetting paid for work when you are on

vacation. Some employers offer 1 week after one year of employment. Others offer two, possible 3 weeks after years of employment.

Many employers pay workers when they are off for holidays.

Employee ServicesExtras to improve employee morale and

working conditions.Can you think of an example?

10% off store merchandise, free parking, YMCA membership, tuition reimbursement, day-care, counseling, wellness centers.

Child CareProviding on-site child care. The textbook

suggest future Federal Legislation is likely to make child care more affordable for working parents.

Sick pay

It is customary to receive 3 to 10 days a year as sick days for full-time employees.

Leave of AbsenceA leave of absence (sometimes with pay,

sometimes without pay).What are some common reasons for leave of

absence?New baby, Medical Leave Act, or completing

education. (Sabbatical)

INsuranceGroup healthDentalVisionLife insurance

Health InsuranceDeductible employee-paid amout

After deductible has been reached (paid), the plan pays 80% of most doctor bills and prescriptions and 100% of hospitalization charges and emergencies.

Life InsuranceBeneficiary – A designated person who

receives a cash benefit when the insured person dies.

Purpose of life insurance – to partially offset the income lost when a wage earner dies.

Dental InsuranceMost plans provide a maximum benefit per

year per family. (Orthodontia) braces may not be covered.

Routine exams and cleanings are often covered at 100%, while most other services are covered at 80%.

Other services like crowns, bridges, and root canals may only be covered at 50%.

Bonuses and Stock Options▪ Bonuses are incentive pay based on Quality of workYears of servceCompany Sales/Profits▪ Stock Options give employees (usually

executives) the right to buy set number of shares of the company’s stock at a fixed

price by a certain time.

With stock options the employees benefit as long as what?

As long as the stock price goes up.

Pension PlansPension plans: - Completely funded by employer - Upon retirement, employee receives a monthly paycheck. 401 (K): - Not completely funded by employer - Employee makes contributions to account

Vested – Being entitled to a full retirement account after a specified period of time, such as 5 years.

Travel ExpensesWhile out of town on business, employees

often receive daily allowance, motel, meals, and other travel expenses paid for.

Some companies require an employee to keep up with receipts to get reimbursed later.

Company Car

Generally large companies provide more extensive optional benefits than do small companies

Cafeteria-style employee benefits – Programs that allow workers to base their job benefits on personal needs.

Flexibility – A married person may opt for increased health insurance and a single person may opt for child-care services.