Chapter #1

Pay, Benefits, and Working Conditions

Section #1.1

Understanding Pay, Benefits, and Incentives

Compute payroll deductions and net pay.Identify optional and required employee

benefits and recognize their value.

Section Goals

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.

Gross Pay, Deductions, and Net Pay

1. Determine your hourly wage.2. Determine the number of hours you worked

during the pay period.3. Multiply your hourly wage by the number of

hours worked to calculate your gross pay amount.

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?

Example: Calculating Gross Pay (Hourly)

$6.50 x 40 = $260.00

1. Determine your hourly wage.2. Determine the number of regular time hours

you worked during the pay period.3. Determine your overtime pay rate (hourly

wage x 1.5).4. Determine how many overtime hours you

worked during the pay period.5. Multiply the number of overtime hours

worked by your overtime pay rate.6. Add your regular pay to your overtime pay

to determine your total gross pay.

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?

Example: Calculating 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

1. Determine your annual salary.2. Determine how many time you will receive a

paycheck during the year.3. Divide your annual salary by the number of

pay periods there are during the year.

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?

Example: Calculating Gross Pay (Salary)

52 weeks / 2 = 26 pay periods$24,000 x 26 = $923.08

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

Amounts subtracted from your gross pay.Net Pay:

Gross pay minus deductions.

Deductions

1. Determine hourly gross pay.2. Add together the amount of each deduction.3. Subtract gross pay from the total amount of

deductions.

Calculating 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?

Example: Net Pay (Hourly)

$13.00 + $4.48 + $20.00 + $11.00 + $2.50 = $50.98$260.00 - $50.98 = $209.02

1. Determine your total gross pay plus overtime.

2. Add together the amount of each deduction.3. Subtract your total gross pay plus overtime

from the total amount of deductions.

Calculating 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?

Example: Net Pay with Overtime

$14.50 + $5.58 + $20.00 + $11.00 + $2.50 = $53.58$308.75 - $53.58 = $255.17

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.

Calculating 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?

Example: Net Pay (Salary)

$78.00 + $26.88 + $20.00 + $11.00 + $2.50 + $3.80 = $142.18$923.08 - $142.18 = $780.90

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.

Self-Employed Requirements

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.

Benefits and Incentives

Section #1.2

Work Arrangements and Organizations

Explain several flexible job arrangements.Describe the role of unions and professional

organizations in the workplace.

Section Goals

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.

Flexible Work Arrangements

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.

Labor Unions

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.

Professional Organizations

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

Bibliography