Transcript Document

Money Management
Employee Pay &
Benefits
Chapter Six Notes
GETTING PAID
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There’s nothing quite like getting
your first paycheck – money
earned for hard work!
Unfortunately, what you agreed to
work for is not what you are going
to get paid.
Deductions will be taken, both
required and optional.
This chapter explained what
deductions are!
Gross Pay and Overtime
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Gross pay is the total pay before any deductions
are made! The calculation for gross pay with less
than 40 hours worked is:
Gross Pay = Regular Pay Rate X Hours Worked
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Overtime is defined as hours worked beyond the
regular hours. A standard work week is forty hours.
According to the Fair Labor Standards Act
overtime is 1 ½ times your regular rate of pay.
Overtime Pay = (Regular Pay x 1.5) x O.T. Hours Worked
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FOR EXAMPLE, a person may have worked 45 hours.
Their gross pay would be calculated as follows:
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40 hours X $4.50 per hour = $180.00
5 hours X (4.50 *1.5) = $33.75
Gross pay = $180.00 + $33.75 OR $213.75
Monthly or Annual Salary
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Some employees are paid a fixed salary
INSTEAD of being paid by the hour.
Typically salaried employees either have a
monthly salary or an annual salary.
If they have a monthly salary it is usually divided
by four and paid each week or by two and paid
biweekly.
If they have a yearly salary it is usually divided
by 26 and paid every other week.
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For example: http://hrs.aaps.k12.mi.us/ (page 101).
$71,080 / 26 = $2,733.85 every two weeks
Most salaried employees DO NOT get overtime
for working more than 40 hours in a week.
Some do though... Usually at an agreed upon
overtime rate.
DEDUCTIONS
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Amounts subtracted from your gross pay
are known as deductions.
Some deductions are required by law:
Social Security, Federal & State Income
Tax.
Others are optional and you may elect one
or more of them: purchase of savings
bonds, contributions to a retirement plan &
charitable contributions.
Employers have to keep VERY detailed
records of wages earned and deductions
collected.
Employees must receive a detailed list of
all deductions withheld from their
paychecks.
NET PAY
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NET PAY – The amount left when all the
deductions are taken out of your gross pay.
Regular Wages/Salary + Overtime = Gross Pay
Gross Pay – Deductions = Net Pay
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Tax Withholdings for Federal and State
Income Tax are determined from tax tables.
The more allowances a person claims on
his/her W-4, the less the employer will
withhold for their income tax.
Tax withholdings for Social Security can
change over time. Right now it is calculated
by multiplying your gross pay x 7.65%
BENEFITS
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Benefits are company provided supplements to
income.
Some benefits are required by law such as
unemployment compensation, worker’s compensation
and Social Security.
In order to attract high quality employees, many
employers offer special additional benefits.
For Example: CHECK OUT WHAT GOOGLE HAS TO
OFFER. OMG!
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http://www.youtube.com/watch?v=_QqT38QRA84
Typical benefits are health insurance, pension plans,
paid sick leave and vacations, profit-sharing.
Benefits Explained
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Profit-sharing – a plan that allows
employees to receive a portion of the
company’s profits. The more money the
company makes, the more the company has
to share with it’s employees. This can lead to
a very motivated workforce.
Paid Vacations and Holidays – Most
businesses provide employees with a set
amount of paid vacation time (which means
that while you are on vacation you are paid
as usual). The average is two to three weeks
of paid vacation per year.
Most full-time employees also receive pay for
official holidays: Typically include Labor Day,
Memorial Day, Thanksgiving, New Year’s
Day.
Employee Services & Sick Pay
Employee Services or “Perks” are the extras
that companies offer in order to improve
employee morale and working conditions.
• Many employers offer free or discounted
merchandise to employees. Other perks may
include free parking, day-care centers and
reimbursement for education costs.
 Sick Pay – many businesses provide an
allowance for sick days. It is customary to receive
anywhere from 3-10 days.
 Leaves of Absence – Some employers will allow
you to leave your job, without pay, for certain
reasons, with a guarantee that you can have your
job back at a later time. (Reasons include having
a kid, sickness or death in the family etc...)
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INSURANCE
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One of the biggest and most important benefits is
INSURANCE!
Types include:
Insurance – Typically the plans require a
deductible (an amount paid up front). Once that
amount is paid the insurance plan will pay anywhere
from 80-100% of medical expenses.
 Life Insurance – pays a cash benefit to a
designated person, called a beneficiary, if the insured
person dies. The purpose is to cover lost wages from
that provider. Typical policies range from $50,000 to
$100,000.
 Dental and Vision Insurance – Plans differ.
Typically dental plans cover up to a specified amount
per year, per family member. Some cover braces,
others don’t. Vision insurance also varies, most
cover eye exams and lenses once every couple of
years.
 Health
Bonuses and Stock Options
and Pension Plans
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Bonuses may be handed out based on the
quality of work done.
Stock Options give employees, usually
executives, the right to buy a set number of
shares of the company’s stock at a fixed
price. The employee gains as the stocks go
up.
Pension and Savings Plans – some
employers provide retirement plans such as
a pension or help you set up a retirement
savings plan, like a 401(k). This means that
you can still receive monthly checks when
you are retired!
We will go into MUCH greater detail on
retirement plans later this semester!
Evaluation of Employee
Benefits
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Many of these optional benefits are
of GREAT VALUE to employees.
As we’ve discussed in class,
benefits can easily add up to 30%
to your total compensation
package!
When you are out shopping for
your job, don’t forget to weigh in
the job benefits!