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?
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Types of Pay
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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
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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
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Fair Labor
Standards Act
Includes equal pay
provisions that
forbids employers
from paying one
person less for the
same work.
Equal Pay
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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
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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
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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
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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
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Other benefits:
paid holidays,
vacation, or
sick time
Employment Classifications
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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Consider filing
electronically
through the IRS
website
Your money is
usually returned
much quicker