Pay and Benefits With pay and benefits comes

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. n What are the advantages or disadvantages of a set salary? n

Types of Pay Wages : employee earning that are paid by the hour, day or item. n Piecework: wages based on the number of items or pieces produced. n Commission: a fixed percent or amount given to employees In exchange for making a sale. n

Types of Pay Some employees earn a commission plus a salary n Others work of straight commission. n What are the advantages or disadvantages? n Tips: money earned in exchange for a service n

Equal Pay Fair Labor Standards Act n Includes equal pay provisions that forbids employers from paying one person less for the same work. n

Equal Pay n n n 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 n Overtime may be paid for anything over 8 hours n Salaried employees may be exempt n

Types of Benefits Insurance benefits: health care plans which may be paid for or available at a reduced cost n Health care is coverage for employees is seen as a problem for some employers. Why? n

Types of Benefits Savings and retirement plans: taxable or pre-taxed savings plans, retirement plans, employer contribution or matching plans n Vested: allows an employee to be entitled to part of or all of their money in a retirement plan. Ex: vested 20% per year n

Types of Benefits n Other benefits: paid holidays, vacation, or sick time

Employment Classifications: n Full-time: works hour of at least 35 hours per week. Usually can take part in employee sponsored benefit plans. n Part-time: employees who work less than 35 hours per week n

Employment Classifications n n 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 n n 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 n Direct deposit: an electronic transfer of funds directly into your account n Employees will receive a pay stub providing all payroll information n

Your Paycheck Pay stub provides useful information and helps keep track of your earnings. n Look at page 197 n Why should you go over your pay stub carefully each time you are paid? n

Your Paycheck Gross pay: is the total amount of money earned for working a pay period before deductions. n Deduction: anything that is subtracted from gross pay. Can include taxes, benefits, or retirement with holdings n

Your Paycheck n n n 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 n FICA-Federal Insurance Contributions Act n If you remember what FICA means you will be only one of a few to know n

Your Paycheck Net pay: the amount of pay an employee is left with after taxes and other deductions are subtracted from the gross pay n Also known as “take home pay” n

Income Tax Income tax responsibility according to the IRS n 1. Complete a W-4 form that allows an employer to withhold income tax from your pay. n 2. File a tax return at least once a year, and pay any additional tax owed n

Income Tax n n n 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. n Taxes must be file by April 15 th of the following year. n You will need the following items before you file n

Income Tax W-2 Form: an employer sends you this form showing your total earnings, and total taxes deducted for the year n 1099 -INT: a form showing your earned interest income for the year in a savings account. n

Income Tax n n n 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. n Adjusted gross income: Income that has been subtracted from total (gross) income n Tax deduction: reduces the amount of income that is taxed n

Income Tax Two ways to take tax deductions n 1. Itemized deductions: amount actually spent on tax-deductible expenses Ex: Charity, church, mortgage interest n Why would the government allow you to deduct the interest on your home loan? n

Income Tax 2. Standard deduction: set amount the IRS allows without listing expenses or having receipts n Taxable income: the portion of your income that is actually subject to tax n Tax credit: amount subtracted from taxes owed ex: education, child care n

Electronic Filing Consider filing electronically through the IRS website n Your money is usually returned much quicker n