Employee’s Pay Chapter 21

Pay Employees are paid either a salary or a wage. If the employee gets paid based on the number of hours they have worked, this is called a wage. If the employee receives a set amount of money every year, and is given in 12 installments (every month)

Tax Give me your money! Every employee pays tax on their wages. In the UK it is called Pay As You Earn (PAYE). Other deductions are also taken from the employee’s wage / salary such as National Insurance Therefore distinction is made between: Gross pay (total wage / salary before any deductions) Net pay (the wage / salary after deductions)

Tax In an attempt to maximise revenue for the government and to equally spread the country’s wealth, tax is calculated by the following: I earn £45,000 / year How much tax do I pay? Allowances: 0 - £7,475 tax free £7,476 - £25,000 = 10% £25,001 - £38,000 = 20% £38,001 - £100,000 = 45% 100,001 + = 65% This amount is tax free This amount (25,000 – 7,475 = 17,525 is charged at 10% (1,752.5) This amount (38,000 – 25,000) = 13,000 is charged at 20% (2,600) This amount (45,000 – 38,000) = 7,000 is charged at 45% (3,150) £7502.5

Work out how much Tax each person pays 0 - ฿ 150,000 = tax free ฿ 150,000 - ฿ 500,000 = 10% ฿ 500,000 - ฿ 1,000,000 = 20% ฿ 1,000,000 - ฿ 4,000,000 = 30% ฿ 4,000,000 + = 37% Additional allowances: Dependants Unemployed husband / wife - ฿ 30,000 Parents - ฿ 30,000 Children - ฿ 15,000 (maximum 3 children)

Name: James Gross earnings: ฿ 1,020,000 Dependents: wife / 1 child How much tax do I pay? This amount is tax free (up to 195,000) This amount (500,000 – 195,000 = 305,000 is charged at 10% (30,500) This amount (1,000, ,000 = 500,000) is charged at 20% (100,000) ฿ 136,500 This amount (1,020,000 – 1,000,000 = 20,000) is charged at 30% (6,000)

Name: John Gross earnings: ฿ 6,000,000 Dependents: wife / 4 children How much tax do I pay? This amount is tax free (up to 225,000) This amount (500,000 – 225,000 = 275,000 is charged at 10% (27,500) This amount (1,000,000 = 500,000 = 500,000) is charged at 20% (100,000) ฿ 1,767,50 0 This amount (4,000,000 – 1,000,000 = 3,000,000) is charged at 30% (900,000) This amount (6,000,000 – 4,000,000 = 2,000,000) is charged at 37% (740,000)

Name: Jane Gross earnings: ฿ 1,500,000 Dependents: Parents How much tax do I pay?

Name: Mf Fletcher Gross earnings: ฿ 1,020,000 Dependents: 0 How much tax do I pay?

Therefore two people may receive the same gross pay, however have different allowances and end up with different net pay. In many countries, national insurance must be paid, and in return the citizen receives: Incapacity benefit Jobseeker’s allowance Maternity allowance Retirement allowance Widow (general / mother / pension) State pension Deductions thus far: PAYE National Insurance Additional pension contributions Voluntary contributions (such as donation to charities) Additional payments: Statutory sick pay Statutory Maternity /Paternity pay This is usually a fixed amount and is paid equally by everyone

Recording payment of wages and salaries Bank 2,000 Wages BankHM Revenue & Customs Wage2,000 Wage a/c is debited with net amount paid to employees. Bank a/c is credited HM Rev & Cust 600 Wages 600 Wages a/c debited with the total amount of income tax to be paid for all employees Bank 600 HM Rev & Cust 600 Money is paid out of the bank to HM Revenue & Customs Profit & Loss 2,600

Homework Complete a poster 1 / 2 Aom & Fah 3 PP 4 Hong 5 Zin & New 6 Dior & Pat 7 & 8 Nancy 10 Chun 11 Kin & Jeanna 13 Cash Book 14 Grace 15 & 16 Oscar 17 May 18 Eve 19 Joe 21 Noynae