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Pay, Benefits, and Working Conditions. Chapter #1. Understanding Pay, Benefits, and Incentives. Section #1.1. Section Goals. Compute payroll deductions and net pay. Identify optional and required employee benefits and recognize their value. Gross Pay, Deductions, and Net Pay.

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Pay, Benefits, and Working Conditions

Chapter #1


Understanding Pay, Benefits, and Incentives

Section #1.1


Section Goals

  • Compute payroll deductions and net pay.

  • Identify optional and required employee benefits and recognize their value.


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.


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.


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


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.


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


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.


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


Deductions

  • Deductions are subtracted from gross pay to determine net pay.

    • Deductions:

      • Amounts subtracted from your gross pay.

    • Net Pay:

      • Gross pay minus deductions.


Calculating Net Pay (Hourly)

  • Determine hourly gross pay.

  • Add together the amount of each deduction.

  • Subtract gross pay from the total amount of deductions.


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


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.


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


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.


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


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.


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.


Work Arrangements and Organizations

Section #1.2


Section Goals

  • Explain several flexible job arrangements.

  • Describe the role of unions and professional organizations in the workplace.


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.


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.


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.


Bibliography

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


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