Presentation on theme: "SECTION 2 WORK Starter… In pairs come up with your own definition of ‘Tax’"— Presentation transcript:
SECTION 2 WORK Starter… In pairs come up with your own definition of ‘Tax’
SECTION 2 WORK The reward for work GCSE ECONOMICS: UNIT 11 Part Two
SECTION 2 WORK Aims of today’s lesson … Identify the difference between Gross and Net Pay Understand the different parts of a Payslip
SECTION 2 WORK Gross Pay Gross pay refers to the total amount of pay that a job will pay However the employee will not be allowed to keep the full amount of gross pay Deductions will be made which will reduce the amount the employee actually receives
SECTION 2 WORK Net Pay Net pay refers to the pay after all deductions for tax, national insurance and pension contributions have been made Net pay is sometimes known as ‘take-home pay’ as it is the final amount Gross pay is useful to know for job comparisons Net pay is not strictly comparable between jobs as the amount of deductions will depend on various factors such as the level of income and pension contributions
SECTION 2 WORK Deductions from pay: Income Tax Income tax is a tax on money paid to an employee Although not all income is taxed, the income tax will be paid as a percentage of earnings People only pay income tax on earnings above a tax-free allowance The percentage rate paid in income tax depends on the level of income, which is indicated by a tax code As incomes rise, the percentage rate of income tax paid will rise Income tax in the UK is paid in two ways 1.Pay as you earn (PAYE), where tax is deducted by the employer before income is paid to the employee 2.Self-assessment (SA) for workers who are self-employed - tax is paid by the worker
SECTION 2 WORK Deductions from pay: National Insurance National Insurance Contributions (NIC) are paid by employees on incomes to build up an entitlement to certain benefits and the state pension Like income tax, national insurance is paid as a percentage of income earned The rates at which it is paid are different to those of income tax
SECTION 2 WORK Deductions from pay: Pension Contributions Some employees will pay fewer NICs because they make payments to either a private or a company pension scheme Employees pay a percentage of their income, which will then be invested The employee will receive the pension when reaching retirement age
SECTION 2 WORK Deductions from pay: Other deductions There may be other deductions from an employee's income, such as; – Trade union subscriptions – Staff association membership fees – Student loan repayments
SECTION 2 WORK Payslip: Extra key items Tax code: employees have different tax codes which relate to the different amount of tax-free allowance each employee has P45: this is a document provided by an employer when a employee leaves the organisation P60: this is a document provided by an employer on a yearly basis showing total pay and deductions for the year
SECTION 2 WORK Extension Task: Differences in Pay Using the internet find out the following; 1.What types of occupations pay the most 2.What types of occupations pay the least 3. Why wages (pay) differ between occupations (jobs) Present your results in a PowerPoint!
SECTION 2 WORK Plenary...key questions 1.State 4 items that might be deducted from an employee’s gross pay 2.Referring to Joe Smith’s pay slip, what percentage of gross pay has been deducted from his wages? 3.What’s the difference between a P45 and a P60?