1. Pay, Benefits, and Working Conditions

2. Understanding Pay, Benefits, and Incentives

3. Gross Pay, Deductions and Net Pay
When you take a job, you agree to perform certain tasks for regular pay.
Gross Pay is the total amount you earn before any deductions are subtracted.
If you work for an hourly wage, any overtime pay you earned during the pay period must be added to your regular pay to determine your gross pay.

4. How to Calculate Gross Pay
Gross Pay = Number of Hours x Hourly Wage
Example: Emily makes minimum wage working at McDonalds. She works 40 hours a week. Assuming she gets paid every week, what is her gross pay at the end of a week? What is her gross pay if she is paid every other week?
Gross Pay = # Hours x hourly wage
= 40 x 7.25
= $290
Gross Pay = # Hours x Hourly Wage
= 80 x 7.25
= $580

5. How to Calculate Gross Pay with Overtime
Overtime is time worked beyond the regular hours.
A standard workday is 8 continuous hours with scheduled breaks plus an unpaid lunch period.
A standard workweek is 40 hours a week.
According to the Fair Labor Standards Act, employees must pay hourly workers for overtime at the rate of 1.5 times the regular rate of pay.
What is the overtime rate for minimum wage?
7.25 x 1.5 = $10.88

6. How to Calculate Gross Pay with Overtimes (Cont’d)
Suppose that Emily work 45 hours in a week. If she is paid every week, how much will she be paid if she earned minimum wage?
If Emily work 43 hours in one week and 46 hours the next, how much will she be paid if she is paid every two weeks?
Regular Pay: 40 x 7.25 = $290
Overtime Pay: 5 x = $54.40
Total: $290 + $54.40 = $344.40
Regular Pay: 80 x 7.25 = $580
Overtime Pay: 9 x = $97.92
Total: $580 + $97.92 = $677.92

7. Salary
Salaried employees do not receive additional pay for overtime work.
This is based on the theory that salary employees will get the job done regardless of how much or how little time they put into the job. If they do not want to put in overtime, then salary employees will make sure that the work is done efficiently within a regular work week.
Gross Pay = Salary
Some jobs will state your salary in an annual amount.
Your employer will divide the annual salary into equal amounts to be paid each pay period.
You are hired on at a new company starting at $38,000 a year. If you are paid once a month, what will you see on your paychecks before deductions?
38,000/12 = 3,166.67

8. Deductions
Amounts subtracted from your gross pay are called deductions.
Some deductions are required by law.
Other deductions are optional and you may elect one or more of them.
Optional deductions will not be taken out of your check without your written consent, except by court order
With each paycheck, you will receive a detailed list of all deductions taken from your gross pay.
We’ve discussed this before. What are some deductions that are required by law?
social security tax and federal income tax
What are some optional deductions?
insurance, 401k, union dues

9. Net Pay
When all deductions are taken out of your gross pay, the amount left is your net pay.
Often called “Take-home pay” because it is the amount you can actually use as you wish.
Net Pay = Gross Pay – Deductions
Sample Pay Stub

10. Self-Employed Requirements
People who are self-employed do not have employee deductions and withholdings.
Instead, they must file estimated tax returns four times a year with payments.
To do this, self-employed people estimate the total amount they will owe in taxes for the coming year. They divide this number by 4 to determine the amount to pay with each quarterly return.
Self-employed people also have to pay Social Security Tax and Medicare Tax. They must pay both the employee and matching employer contributions.
12.4% of gross income goes to Social Security Tax
2.9% goes to Medicare Tax
The total 15.3% is called the self-employment tax. It is the total social security and Medicare tax, including employer-matching contributions, paid by people who work for themselves.

11. Benefits and Incentives
Many employers offer benefits, which are forms of employee compensations in addition to pay.
Common benefits include health insurances, retirement savings plans, pension plans, paid sick leave and vacations, and profit sharing.
Some benefits are required by law
Unemployment compensations, workers’ compensations, and match social security and Medicare tax

12. Benefits and Incentives (Cont’d)
Profit Sharing
A plan that allows employees to receive a portion of the company’s profits at the end of the corporate year. Most companies that provide profit sharing consider it incentive pay – money offered to encourage employees to strive for higher levels of performance.
Paid Vacations and Holidays
Most businesses provide full-time employees with a set amount of paid vacation time. This means that while you’re on vacation, you are paid as usual. An employee required to work on a holiday is usually paid double or more than double the regular hourly rate of pay

13. Benefits and Incentives (Cont’d)
Employee Services
Employee services are extras that companies offer in order to improve employee morale and working conditions. Many companies offer employee discounts on merchandise sold or made by the company. Other services include social and recreational programs, free parking, tuition reimbursement for college courses, day-care centers, wellness programs, and counseling for employee programs
Childcare
Childcare is a major issue for working parents. Many companies provide on-site child-care facilities as well as coverage of child-care expenses as a part of employee benefit packages.

14. Benefits and Incentives (Cont’d)
Sick Pay
Many businesses also provide an allowance of days each year for illness with pay as usual. This benefit is usually available to full-time employees only. It is customary to receive 3-10 days a year as “sick days” without deductions from pay
Leaves of Absence
Some employers allow employees to temporarily leave their jobs (without pay) for certain reasons, such as having children or completing education, and return to their jobs at a later time. While a leave of absence may be unpaid, it has an important advantage: it gives job security and permits you to take time off for important events in your life. This will also allow employees to attend to important matters without calling in “sick” when they aren’t sick
Some companies have recently started combining sick pay and paid vacation time. This way, whenever an employee calls in, they are not punished.
If an employee knows in advance that they will have to take a leave of absence, typically they will wait to use their vacation time until the beginning of the leave of absence. This way, they can continue to get paid for at least a portion of their time away.

15. Benefits and Incentives (Cont’d)
Insurance
Most large companies provide group health insurance plans for all employees. A few plans are paid for almost entirely by the employer, as a part of employee compensation. Most plans require that employees pay for part of their own coverage, as well as to cover any dependents they may have. Insurance plans can cover health, life, dental, and vision insurance.
Health insurances
A typical health insurance plan has an employee-paid amount, or deductible. After the deductible has been reached, the plan pays 80% of most doctor bills and prescriptions and 100% of hospitalization charges and emergency bills. Traditional insurance plans will not cover routine physical examinations. As an alternative to a traditional plan, your employer may offer you a preferred- provider plan (PPO) or a health maintenance organization plan (HMO)

16. Benefits and Incentives (Cont’d)
Life Insurance
Many companies offer group life insurance. Life insurance pays a cash benefit to a designated person, called a beneficiary when the insured person dies. The purpose of life insurance is to partially offset the income lost when a wage earner dies.
Dental Insurance
Most dental plans provide a maximum benefit per year per family member. Orthodontia (braces) may not be covered. Routine exams and cleanings are often covered 100%, while other services are covered at 80% of a predetermined fee range.

17. Benefits and Incentives (Cont’d)
Vision Insurance
Vision insurance covers the cost f prescription lenses and eye examinations once every few years. As the employee gets older, more frequent exams ma be allowed. Generally, frames are not covered. But, sometimes coverage is available for contact lenses.
Bonuses and Stock Options
Bonuses are incentive pay based on quality of work done, years of service, o company sales or profits. Holiday bonuses are often based on years of services. If a division of a company reaches a particular sales goal in a year, all top-level managers might receive a bonus equal to a percentage of their current salaries. Stock-purchase options give employees the right to buy a set number of shares of the company’s stock at a fixed price by a certain time.

18. Benefits and Incentives (Cont’d)
Pension and Savings Plan
Some employers provide pension plans for retirement. Pension plans are completely funded by the employer. When an employee retires, he or she receives a monthly check. Employees are fully vested – entitled to the full retirement account – after a specified period of time.
Employer sponsored retirement plans, such as a 401(k) or a 403(b) are also retirement plans. Employers do not bear the full cost of these plans, and as a result many companies are switching from pensions to these savings accounts. For the 40(k) and 403(b), the employee makes contributions to his or her own account. The employer may also contribute money to the employees account.
401k private employers
403b government employers

19. Benefits and Incentives (Cont’d)
Travel Expenses
Companies that require employers to travel in the course of their work often provide a company car or a mileage allowance if employees use their own car. While out of town, employees receive a daily allowance, or have their motel, meals, and other travel expenses paid.
Evaluating Employee Benefits
Many of these optional benefits are of great value to employees. Benefits generally are not currently taxable to employers, yet they provide valuable coverage and advantages. In recent years, employee benefits have been expanded to meet the needs of different life situations. Cafeteria-Style employee benefits are programs that allow workers to base their job benefits on personal needs.

20. Work Arrangements and Organizations

21. Flexible Work Arrangements
Many employees are responding to changing lifestyles and needs of their employees. By designing more flexible jobs, employers can reduce:
Absenteeism
Burnout
Turnover

22. Altered Workweeks
Many firms have experimented with altered workweeks to get away from the standard 8 hours a day, 5 days a week work schedule.
Flextime is one work schedule alternative
Flexible schedules, or flextime, allows employees to choose their working hours within defined limits.
Flextime is good for business because employees are responsible for working a full day regardless of when they arrive on the job.
Another is the compressed workweek
A compressed workweek is a work schedule that fits the normal 40 hour work week into less than 5 days.
The typical compressed workweek is 10 hours a day for 4 days, followed by 3 days off.
Flextime generally requires all employees to be present during a specified core time period. Employees can then choose the rest of their work hours around this core period. Employees negotiate their starting times, usually within a 3 – 4 hour period.
Employees experience greater job satisfaction because flextime helps them fulfill their personal needs.

23. Job Rotation
Job Rotation is a job design in which employees are trained to do more than one specialized task.
Employees “rotate” from one task to another.
Job rotation gives employees more variety in their work and allows them to use different skills.
It will reduce boredom and burnout, leading to greater job satisfaction.

24. Job Sharing
Job sharing is a job design in which two people share one full-time position.
They split the salary and benefits according to each person’s contributions.
Especially attractive to people who want more part-time work
By satisfying employees’ needs for more personal time, job sharing
Reduces absenteeism and tardiness
Lowers fatigue
Improves productivity

25. Permanent Part-Time and Telecommuting
Many employees choose to work only part-time.
Companies can save on salary and benefits by hiring permanent part-time employees
This provides some benefits, such as job security, while allowing freedom to spend more time away from work.
Advances in technology make another flexible work arrangement possible: telecommuting
Telecommuters can work at home or on the road and stay in contact with their manager and co-workers through , fax, and cell-phone.
Employees who telecommute often do computer-related work.
Telecommuting does not work well in jobs that require frequent face-to-face interaction among employees or that require employees to work together in one place to create a product.

26. Labor Unions and Professional Organizations
Many jobs involve union membership or participation in a professional organization as a requirement of employment.
Unions are groups of people joined together for a common purpose
A labor union is a group of people who work in the same or similar occupations, organized for the benefit of all employees in these occupations.

27. Functions of Unions Labor unions have four major functions
Recruit new members
Engage in collective bargaining
Collective bargaining = the process of negotiating the terms of employment for union members
Support political candidates who are favorable to the union
Provide support services for members

28. Types of Unions
Unions are self-governing organizations that can be classified into three types:
Craft unions
Limited to those who practice a particular craft or trade. Example: bricklayers, carpenters, or plasters. Major craft unions exist in building, printing, maritime trades, and for railroad employees
Industrial unions
Skilled, semiskilled, or unskilled employees in a particular place, industry, or group of industries. Examples include AFL-CIO, Teamsters, and United Auto Workers. Most of this country’s basic industries (steel, automobiles, rubber, glass, machinery, mining) are heavily unionized.
Public-employee unions
Municipal. County, state, or federal employees such as firefighters, teachers, and police officers may organize public-employee unions. These unions are organized much like craft and industrial unions expect that they generally do not hire outside officers. Members serve as union representatives and officers, sometimes with pay from union dues.

29. Professional Organizations
A professional organization is an organization of people in a particular occupation that requires considerable training and specialized skills.
Will also collect dues from members and provide support services
Professional organizations establish and maintain professional standards and publish professional journals to help keep members up-to-date in their field.
They often provide pension, retirement, and insurance benefits for members.
Through lobbying, professional organizations try to influence public officials to take political action that benefits the profession.
Professional organizations administer exams, accreditations, and admission requirements to maintain professional standards
One of the more recognizable professional organizations is the American Bar Association for lawyers. In order to be licensed or “admitted to the bar,” lawyers must pass rigorous tests administered by their state’s bar associations. Lawyers who commit serious misconduct may be disbarred, which means they can no longer practice law.