2 Types of PayYour pay can be calculated in a number of ways – make sure you know which way it is being calculated.Types of Pay:Salary: Set amount of money earned per year – or another set time.Wages: Set amount of paid per hour or day or item of work.Piecework: Usually involves manufacturing/ assembly items
3 Types of PayCommission: Fixed percentage or amount of profit given for making a saleSales, Marketing, Real Estate, Retail jobsBonus: Sum of money paid in addition to regular pay for job performance/meeting goals.Tips: Money given to employee by customer in exchange for a serviceWaitresses, Bartenders, Hair stylists, Caddies
4 Regulations Affecting Pay Fair Labor Standards Act – standards governing employee payment and compensation.Equal PayFSLA forbid employers from paying one person less than another person for the same work.Work in same establishmentWork under same/similar conditionsPerform work requiring skill, effort, and responsibilityOften used to prevent discrimination against women, minorities, and older workers.
5 http://www.dwd.state.wi.us/dwd/publications/erd/pdf/erd_9247_p .pdf RegulationsMinimum Wage: Lowest hourly rate employer may legally pay most workers.Raised periodically for inflation. (Just raised).pdfSubminimum Wage: A wage paid under certain conditions to certain categories of workers, such as trainees, that is less than the established minimum wage.
6 Over Time Work in excess of 40 hours per week. Usually 1.5 times normal wageFor example $8.00 * 1.5 = $12.00/hrNot paid to salaried employees – weigh the loss of overtime pay before changing to salaried position.
7 Where Does My Money Go?Almost 31% of an individual’s paycheck is deductedTaxes are the largest expense most individuals will haveTherefore, it is important to understand the systematic deductionsU.S. tax system operates on an ongoing payment systemTaxes are immediately paid on income earned
8 Family Economics & Financial Education Reading a Paycheck
9 Paycheck Stub Paycheck Stub On-The-GoEmployee Beakens, JoeSSNCheck # 164Check Amount $1,102.98Employee Address 293 Michael Grove Billings, MTPay Type- Gross PayDeductionsCurrentYear-to-date $1,353.33Federal Withholding State Withholding Fed OASDI/EE or Social SecurityFed MED/EE or Medicare Medical 401K$ $40.82 $83.91 $19.62 $0.00 $0.00$ $ $ $ $0.00 $0.00Totals$250.35$1,502.10Pay Period 6/11/2004-7/11/2004Paycheck StubA document included each pay period which outlines paycheck deductions
10 Personal Information Personal Information States the employee’s full name, address, and Social Security numberAlways check to ensure this information is correct
11 Pay PeriodPay PeriodThe length of time for which an employee’s wages are calculated; most are weekly, bi- weekly, twice a month, or monthlyThe last day of the pay period is not always payday to allow a business to accurately compute wages
12 Gross PayGross PayThe total amount of money earned during a pay period before deductionsThis is calculated by multiplying the number of hours worked by the hourly rateIf a person is on salary, it is the total salary amount divided by the specified time period
13 Net PayNet PayThe amount of money left after all deductions have been withheld from the gross pay earned in the pay period
14 Deductions Deductions The amount of money subtracted from the gross pay earned for mandatory systematic taxes, employee sponsored medical benefits, and/or retirement benefits
15 Federal Withholding Tax The amount required by law for employers to withhold from earned wages to pay taxesThe amount of money deducted depends on the amount earned and information provided on the Form W-4Largest deduction withheld from an employee’s gross income
16 State Withholding Tax State Withholding Tax The percentage deducted from an individual’s paycheck to assist in funding government agencies within the stateThe percentage deducted depends on the amount of gross pay earned
17 FICA (Federal Insurance Contribution Act) This tax includes two separate taxes: Fed OASDI/EE or Social Security and Fed MED/EE or MedicareThese two taxes can be combined as one line item or itemized separately on a paycheck stub
18 Social Security Social Security Nation’s retirement program, helps provide retirement income for elderly and pays disability benefitsBased upon a percentage (6.2%) of gross income, employer matches the contribution made by the employee
19 MedicareMedicareNation’s health care program for the elderly and disabled, provides hospital and medical insurance to those who qualifyBased upon a percentage (1.45%) of gross income
20 MedicalMedicalThe amount taken from the employee’s paycheck for medical benefitsOccurs when the employer has a medical plan for employees but does not pay full coverage for his/her benefits
21 Retirement Plan Retirement Plan The amount an employee contributes each pay period to a retirement planA specified percentage of the contribution is often matched by the employerMay be a 401K, a state, or local retirement plan
22 Year-to-Date Year-to-Date Total of all of the deductions which have been withheld from an individual’s paycheck from January 1 to the last day of the pay period indicated on the paycheck stub
23 Be sure to consider benefits when choosing a job!! Types of BenefitsBe sure to consider benefits when choosing a job!!Insurance Benefits: Group health care plans offered by employersOther insurance plans: Vision, dental, disability, long-term care, flex plansSavings and Retirement Benefits: Employers deduct money from the employee’s paychecks to deposit in a savings or investment account.Some or all deducted on a pre-taxed basisTax sheltered annuities, 401K plans
24 Types of Benefits Other benefits: Paid Holidays Vacation Days Sick LeaveFlex AccountsPay for addition education/trainingPaid maternity leave or money towards childcareGym membershipsAddition perks
25 Unions Important Part of American History Developed in early 1900’sProtect Worker’s RightsCollective Bargaining: Meeting with employers and elected officials to negotiate the terms of a contractPayBenefitsWork EnvironmentCurrently hot topic in politics
26 Professional Organizations a nonprofit organization seeking to further a particular profession, the interests of individuals engaged in that profession, and the public interest.Keep up to date with current trends in the professionFurther education or creditsWorkplace or employee pays fee to belongResourcesClassesConferences
28 Why Budget?A budget is helpful no matter how large or small your income is.It is ALL about saving.If created efficiently, a budget can help you:Avoid running out of money between paychecksEvaluate your spending habits and making better choicesSet aside savings for unexpected costs (They WILL happen!)Work toward a financial goal
29 BudgetingAlthough a budget can be created for any time period, most create on for a yearDivided it up into months (by 12)Creating a budget involves three main tasks:Estimating Income (Gross vs Net -- irregular)Estimating Expenses (Fixed vs Variable)Bringing the two into balance – saving
30 Estimating Expenses Group expenses into general categories Groceries, dining out, gas, cable bill, miscellaneous, etc.Fixed Expenses: Regular payments that do not vary from month to month. (Rent, car payment)Variable Expenses: Normally increase and decrease from month to month. (Groceries, Dining Out)The MORE accurate you are – the more effective your budget.
31 Estimating ExpensesYou can estimate your expenses using several ways –Your past spending.Information from bank statements, receipts, tax forms.Expert recommendationsPercentages of income to allow for various expenses.National AveragesConsumer Expenditure Survey – shows how consumers spend their money.Published periodically by the Bureau of Labor StatisticsPie Chart
32 Saving Money PAY YOURSELF FIRST!! 10% of household income – more if you can.Treat savings as another FIXED expense.Necessary to reach long-term savings goals and have emergency fund.
33 Balance Your Budget Income – Expenses = Zero If result is a positive number, add money to savings.If result is a negative number, adjust your budget.Decrease expenses, do not cut out savings.
34 Adjusting Your BudgetLook at discretionary expenses – categories that aren’t necessary.Shopping“Fun” moneyAdd-ons to other expenses (Cell minutes, HD or Tivo, Internet Speed)Think of ways to trim expensesCouponsEating in moreBuy sale itemsReduce Fixed Expenses – Less expensive car, lower rent, better deal on auto insurance.
35 Using Your Budget Establish a budget – use discipline!! Monitor it each weekCompare actual expenses vs. budgeted amountAnalyze if overspending – Make adjustments.Revise budgeted amounts, if needed.