Pay, Benefits, and Working Conditions

1. Pay, Benefits, and Working Conditions Chapter #1

2. Understanding Pay, Benefits, and Incentives Section #1.1

3. Section Goals • Compute payroll deductions and net pay. • Identify optional and required employee benefits and recognize their value.

4. Gross Pay, Deductions, and Net Pay • Gross pay includes your regular pay plus overtime wages earned during that pay period. • Gross Pay: • The total amount you earn before any deductions are subtracted. • Overtime: • Time worked beyond the regular hours.

5. Calculating Gross Pay (Hourly) • Determine your hourly wage. • Determine the number of hours you worked during the pay period. • Multiply your hourly wage by the number of hours worked to calculate your gross pay amount.

6. Example: Calculating Gross Pay (Hourly) • M.J. Smith works for $6.50 an hour. They worked 40 hours during this pay period. What is M.J.’s gross pay for this pay period? $6.50 x 40 = $260.00

7. Calculating Gross Pay with Overtime • Determine your hourly wage. • Determine the number of regular time hours you worked during the pay period. • Determine your overtime pay rate (hourly wage x 1.5). • Determine how many overtime hours you worked during the pay period. • Multiply the number of overtime hours worked by your overtime pay rate. • Add your regular pay to your overtime pay to determine your total gross pay.

8. Example: Calculating Gross Pay with Overtime • During the next pay period, M.J. Smith worked 40 hours at $6.50 an hour. In addition to the regular 40 hours worked, she also worked 5 hours of overtime during this pay period. What is her total gross pay with overtime? $6.50 x 40 = $260.00 $6.50 x 1.5 = $9.75 $9.75 x 5 = $48.75 $260.00 + $48.75 = $308.75

9. Calculating Gross Pay (Salary) • Determine your annual salary. • Determine how many time you will receive a paycheck during the year. • Divide your annual salary by the number of pay periods there are during the year.

10. Example: Calculating Gross Pay (Salary) • T.S. Jones works for $24,000 per year. They get paid every two weeks. What is T.S. Jones’s gross pay each pay period? 52 weeks / 2 = 26 pay periods $24,000 x 26 = $923.08

11. Deductions • Deductions are subtracted from gross pay to determine net pay. • Deductions: • Amounts subtracted from your gross pay. • Net Pay: • Gross pay minus deductions.

12. Calculating Net Pay (Hourly) • Determine hourly gross pay. • Add together the amount of each deduction. • Subtract gross pay from the total amount of deductions.

13. Example: Net Pay (Hourly) • M.J. Smith’s gross pay for this pay period was $260.00. The following deductions were taken out: Federal Tax ($13.00), Medicare ($4.48), Savings Account ($20.00), Health Insurance ($11.00), Union Dues ($2.50). What is M.J. Smith’s net pay for this pay period? $13.00 + $4.48 + $20.00 + $11.00 + $2.50 = $50.98 $260.00 - $50.98 = $209.02

14. Calculating Net Pay with Overtime • Determine your total gross pay plus overtime. • Add together the amount of each deduction. • Subtract your total gross pay plus overtime from the total amount of deductions.

15. Example: Net Pay with Overtime • During the next pay period, M.J. Smith worked 5 hours of overtime which made her total gross pay $308.75. The following deductions were taken out of her pay: Federal Tax ($14.50), Medicare ($5.58), Savings Account ($20.o0), Health Insurance ($11.00), Union Dues ($2.50). What is M.J. Smith’s net pay? $14.50 + $5.58 + $20.00 + $11.00 + $2.50 = $53.58 $308.75 - $53.58 = $255.17

16. Calculating Net Pay (Salary) • Determine the gross pay for each pay period. • Add together the amount of each deduction. • Subtract the total amount of deductions from the gross pay amount.

17. Example: Net Pay (Salary) • T.S. Jones’s gross pay this pay period was $923.08. The following deductions were taken out: Federal Tax ($78.00), Medicare ($26.88), Savings Account ($20.00), Health Insurance ($11.00), Union Dues ($2.50), Life Insurance ($3.80). What is T.S. Jones’s net pay for this pay period? $78.00 + $26.88 + $20.00 + $11.00 + $2.50 + $3.80 = $142.18 $923.08 - $142.18 = $780.90

18. Self-Employed Requirements • Self-employed people pay both the employee and employer portions of social security and Medicare. • Self-Employment Tax: • The total social security and Medicare tax, including employer-matching contributions paid by people who work for themselves. • Self-employed people pay 12.4% of their gross income. for the social security tax and 6.2% of their gross income for the Medicare tax which totals 15.3% of their gross income.

19. Benefits and Incentives • Benefits: • Forms of employee compensation in addition to pay. • Cafeteria-style plans allow employees to choose the benefits that best meet their needs. • Benefits in addition to pay may include: • Profit Sharing: • Incentive Pay: • Money offered to encourage employees to strive for higher levels of performance. • Paid Time Off • Employee Services • Insurance Plans • Bonuses • Stock Options • Retirement Plans • Vested: • Entitled to the fill retirement account.

20. Work Arrangements and Organizations Section #1.2

21. Section Goals • Explain several flexible job arrangements. • Describe the role of unions and professional organizations in the workplace.

22. Flexible Work Arrangements • Flextime, a compressed workweek, job rotation, job sharing, permanent part-time jobs, and telecommuting offer employees flexibility. • Flextime: • Allow employees to choose their working hours within defined limits. • Compressed Workweek: • A work schedule that fits the normal 40-hour week into less than 5 days. • Job Rotation: • A job design in which employees are trained to do more than on specialized task. • Job Sharing: • A job design in which two people share one full-time position.

23. Labor Unions • Labor unions negotiate the terms of work contracts with employers on behalf of their members. • Labor Union: • A group of people who work in the same or similar occupations, organized for the benefits of all employees in these occupations. • Functions of Unions: • Collective Bargaining: • The process of negotiating the terms of employment for union members. • Seniority: • A policy in which the last workers hired will be the first fired when jobs must be cut.

24. Professional Organizations • Professional organizations serve people in highly skilled occupations. • Professional Organization: • An organization of people in a particular occupation that requires considerable training and specialized skills. • These organization maintain standards and keep members current in their fields. • Lobbying: • The process of trying to influence public officials to take political action the benefits the profession.

25. Bibliography • Ryan, J. (2006). “Managing your personal finances; 5th ed.” Thomson South-western; Mason, Ohio