1. My Paycheck Chapter 3

2. Types of Income Earned Income – Money received from working. Six types: wages, tips, salaries, bonuses, commissions, royalties, etc. –Wage: Amount paid for each hour worked. –Salary: a set amount of pay, usually given annually. –Tip: money, often a percentage of the total bill, based on quality of service. Tips are subject to Federal taxes. –Bonus: an amount of money added to wages on a seasonal basis, especially as a reward for good performance.

3. Types of Income –Commission: A set fee or a percentage of a sale paid to a salesperson. OR it can be in addition to salary or wages. –Royalties: a payment based on a percentage of sales. Authors, composers, musicians or inventors can earn this for their works. (similar to commissions) Unearned Income – money that is not earned. Money received from not working. Examples: Interest from savings, prizes, gambling/lottery winnings, gifts, etc.

4. Types of Income Benefits – Forms of pay other than salary or wages. –Some benefits are paid by the company and some require the employee to pay a portion. –Examples include: vacation/paid time off, health insurance, paid holidays, 401K, life insurance, sick days, etc.

5. Hourly Pay Regular Hours – the number of hours an employee is required to work each week. – Full time is 40 hours, Part time is under 40 Overtime Hourly Rate – the amount paid for work beyond the regular hours. – It must be at least one and one-half times (1.5) the hourly rate for regular hours. Minimum Wage – The lowest pay rate allowed by law for each hour worked. – Created in 1938 by FDR as part of the New Deal. First minimum wage was $0.25 per hour!

6. Hourly Pay Federal Minimum Wage – Set by Congress. Currently is at $7.25 / hour State Minimum Wage : Ohio is currently at $8.10/hour. It is adjusted on Jan 1 st of each year for inflation.

7. Methods of Pay Direct Deposit – on payday, the amount of the paycheck is automatically deposited electronically in a bank account. –Must have a bank account. –Companies will give you a pay stub for your records. Paycheck - A check issued to an employee in payment of salary or wages.

8. Pay Periods Many places of business will vary in how often they pay their employees. Pay Period – the time that passes from payday to payday. Weekly- receive a paycheck once a week, 52 paychecks per year. Usually on a set day of the week. Biweekly- receive a paycheck every other week, or 26 times a year. Semi-Monthly – receive a paycheck twice a month, or 24 times a year

9. Gross Pay vs. Net Pay What we are paid per hour or salary will be different then the amount that we receive. This is due to taxes. Gross Pay – the sum of regular pay and overtime pay BEFORE taxes are taken out. Net Pay – the amount of money that the employee takes home. The amount of money AFTER taxes have been taken out. – Also called disposable income, discretionary income.

10. Payroll Taxes Many taxes are deducted from gross pay. Federal – is the largest tax deduction. Used for federal goods and services such as national parks, interstate highways, etc. State – second largest deduction. –used for state goods and services. City – is usually a set percentage. –Used for city goods and services. Withholdings- the amount of federal and state income tax taken out of a paycheck is based on how many people the employee claims.

11. Payroll Taxes - Social Security Social Security - provides some income for: o Retirees o People with profound disability o Children who have lost a parent o A person with children who has experienced the death of a spouse – Created in 1935 by FDR. – It is a required tax that must be taken out of your paycheck. – Current rate is 6.2% – Up to an annual maximum – Paid by each worker and matched by employer

12. Payroll Taxes - Medicare Medicare Tax – Helps pay for your medical bills when you retire. –It is a federal tax that MUST be deducted from your paycheck –Current rate is 1.45%. –Cannot get until age 65. –No Limit – is taken out of your check no matter how much a person earns. –Paid by each worker and matched by each employer

13. Pay Stub The following is an example of what a pay stub can look like and the types of information that can be included. Not all pay stubs will look the same. Common information contained in most pay stubs: –Pay period Dates –Gross Pay, Deductions, Net Pay for the pay period. –Accumulated totals for Gross Pay, Deductions, Net Pay for the year. –Personal Info: Name, Address, Employee Number. –Vacation/Sick Day Balances

14. Reading a Pay Stub

15. Pay Stub Standard Employee Information Name Address Identification or Employee Number Employee Information Pay Date: 6/11/2013 Name Identificatio n Number Address Pay Rate Pay Period Joe Beakens00112233 293 Michael Grove $15.0 0 5/1 – 5/31/2013 Summary Gross Income Total Personal Deductions Net Income Current$2,400.00$747.00$1,653.00 YTD$12,000.00$3,735.00$8,265.00 Earnings TypeRateHoursCurrentYTD Regular $15.0 0 160 $2,400.0 0 $12,000.00 Overtime0000 Deductions Type Personal Deduction Employer Contribution Federal income tax$249.400 State income tax $100.000 Social Security and Medicare $183.60 Retirement plan$144.00 Health insurance$100.00$400.00 Workers’ compensation 0$13.80 Unemployment insurance0$6.26 Employee Leave Balances Type Beginning balance current Beginning balance YTD Used Curren t Used YTD Ending Balance Personal10150510 Sick55005

16. Pay Stub Pay Period Regular schedule that employers pay employees Weekly, bi-weekly, bi- monthly, or monthly Employee Information Pay Date: 6/11/2013 Name Identificatio n Number Address Pay Rate Pay Period Joe Beakens00112233 293 Michael Grove $15.0 0 5/1 – 5/31/2013 Summary Gross Income Total Personal Deductions Net Income Current$2,400.00$747.00$1,653.00 YTD$12,000.00$3,735.00$8,265.00 Earnings TypeRateHoursCurrentYTD Regular $15.0 0 160 $2,400.0 0 $12,000.00 Overtime0000 Deductions Type Personal Deduction Employer Contribution Federal income tax$249.400 State income tax $100.000 Social Security and Medicare $183.60 Retirement plan$144.00 Health insurance$100.00$400.00 Workers’ compensation 0$13.80 Unemployment insurance0$6.26 Employee Leave Balances Type Beginnin g balance current Beginning balance YTD Used Curre nt Used YTD Ending Balance Personal10150510 Sick55005 Why is the pay period different than the pay date?

17. Pay Stub Earnings How wages were calculated May show current and YTD Employee Information Pay Date: 6/11/2013 Name Identificatio n Number Address Pay Rate Pay Period Joe Beakens00112233 293 Michael Grove $15.0 0 5/1 – 5/31/2013 Summary Gross Income Total Personal Deductions Net Income Current$2,400.00$747.00$1,653.00 YTD$12,000.00$3,735.00$8,265.00 Earnings TypeRateHoursCurrentYTD Regular $15.0 0 160 $2,400.0 0 $12,000.00 Overtime0000 Deductions Type Personal Deduction Employer Contribution Federal income tax$249.400 State income tax $100.000 Social Security and Medicare $183.60 Retirement plan$144.00 Health insurance$100.00$400.00 Workers’ compensation 0$13.80 Unemployment insurance0$6.26 Employee Leave Balances Type Beginning balance current Beginning balance YTD Used Curren t Used YTD Ending Balance Personal10150510 Sick55005

18. Pay Stub Deductions All deductions from gross income What are examples of deductions? Employee Information Pay Date: 6/11/2013 Name Identificatio n Number Address Pay Rate Pay Period Joe Beakens00112233 293 Michael Grove $15.0 0 5/1 – 5/31/2013 Summary Gross Income Total Personal Deductions Net Income Current$2,400.00$747.00$1,653.00 YTD$12,000.00$3,735.00$8,265.00 Earnings TypeRateHoursCurrentYTD Regular $15.0 0 160 $2,400.0 0 $12,000.00 Overtime0000 Deductions Type Personal Deduction Employer Contribution Federal income tax$249.400 State income tax $100.000 Social Security and Medicare $183.60 Retirement plan$144.00 Health insurance$100.00$400.00 Workers’ compensation 0$13.80 Unemployment insurance0$6.26 Employee Leave Balances Type Beginning balance current Beginning balance YTD Used Curre nt Used YTD Ending Balance Personal10150510 Sick55005

19. Pay Stub Amount the employer has contributed to various employee benefits and other contributions. Employer contributions What contributions are included? Employee Information Pay Date: 6/11/2013 Name Identificatio n Number Address Pay Rate Pay Period Joe Beakens00112233 293 Michael Grove $15.0 0 5/1 – 5/31/2013 Summary Gross Income Total Personal Deductions Net Income Current$2,400.00$747.00$1,653.00 YTD$12,000.00$3,735.00$8,265.00 Earnings TypeRateHoursCurrentYTD Regular $15.0 0 160 $2,400.0 0 $12,000.00 Overtime0000 Deductions Type Personal Deduction Employer Contribution Federal income tax$249.400 State income tax $100.000 Social Security and Medicare $183.60 Retirement plan$144.00 Health insurance$100.00$400.00 Workers’ compensation 0$13.80 Unemployment insurance0$6.26 Employee Leave Balances Type Beginnin g balance current Beginning balance YTD Used Curre nt Used YTD Ending Balance Personal10150510 Sick55005

20. Pay Stub Employee Leave Balance Summary of the employee’s leave time SickVacationHolidays Employee Information Pay Date: 6/11/2013 Name Identificatio n Number Address Pay Rate Pay Period Joe Beakens00112233 293 Michael Grove $15.0 0 5/1 – 5/31/2013 Summary Gross Income Total Personal Deductions Net Income Current$2,400.00$747.00$1,653.00 YTD$12,000.00$3,735.00$8,265.00 Earnings TypeRateHoursCurrentYTD Regular $15.0 0 160 $2,400.0 0 $12,000.00 Overtime0000 Deductions Type Personal Deduction Employer Contribution Federal income tax$249.400 State income tax $100.000 Social Security and Medicare $183.60 Retirement plan$144.00 Health insurance$100.00$400.00 Workers’ compensation 0$13.80 Unemployment insurance0$6.26 Employee Leave Balances Type Beginning balance current Beginning balance YTD Used Curren t Used YTD Ending Balance Personal10150510 Sick55005