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Chapter 6 Pay, Benefits, and Working Conditions Terms gross pay overtime deductions net pay organization self-employment tax benefits incentive pay vested flextime compressed workweek job rotation job sharing labor union collective bargaining seniority professional lobbying Lesson 6.1 Understanding Pay, Benefits, and Incentives Gross Pay, Deductions, and Net Pay Gross pay- the total amount you earn before any deductions are subtracted Hourly Wages- employees who receive a set rate per hour worked. $6.50 x 40 hours = $260.00 Overtime- Time worked beyond the regular hours. A standard workweek is 5 day of 8 hours/day = 40 hours According to the Fair Labor Standards Act, employers must pay hourly workers for overtime at 1.5 times the regular rate of pay. Overtime for $6.50 wage- $9.75 40 hours x $6.50 = $260.00 5 hours x $9.75 = 48.75 $308.75 Salary- salaried employees do not receive additional pay for overtime work and get a set amount of money instead of an hourly wage Salary is often stated as a yearly amount, so your employer divides your annual salary into equal payments to be paid each pay period. If paid bimonthly $24,000 salary monthly gross pay is $24,000/12 = $2,000 = $1000 per paycheck If paid every two weeks 52 weeks in a year/2 weeks per pay period = 26 pay periods $24,000/26 pay periods = $923.08 per paycheck Deductions- amounts that are subtracted from your gross pay Deductions required by law- social security, federal and state income taxes Net Pay- The amount left after deductions are taken from your gross pay. Often called “take-home pay” Regular wages/Salary + Overtime = Gross Pay Gross Pay – Deductions = Net Pay The amount that will be withheld is determined from tax withholding tables. Self-Employed Requirements People who are self-employed do not have employee deductions and withholdings. They must file estimated tax returns quarterly, with payments. They estimate the total amount they will owe in taxes for the coming year. They divide this number by 4. The IRS credits each payment toward their tax obligation for the year. Since self-employed people are both the employee and the employer, they must pay both the employee and matching employer contributions to social security and Medicare. The self-employment tax is the total social security and Medicare tax, including employer-matching contributions that people who work for themselves pay. Benefits and Incentives Benefits are forms of employee compensation in addition to pay- health insurance, retirement savings plans, paid sick leave, vacations, profit sharing. Profit Sharing A plan that allows employees to receive a portion of the company’s profits at the end of the corporate year. The more money the company makes, the more the company has to share with employees. This is considered incentive pay—offered to encourage employees to strive for higher levels of performance This links part of employee compensation with company profit goals, giving employees an incentive to work harder and reduce waste. Paid Vacations and Holidays Most full time employees have a set amount of paid vacation time, where you are paid as usual while you are on vacation. Another common benefit is paid time off for holidays, which typically include Christmas, Thanksgiving, Fourth of July, Labor Day, Memorial Day. Employee Services Extras that companies offer in order to improve employee morale and working conditions. For example, discounts on the products that the company sells, social and recreation programs, free parking, tuition reimbursement for college courses, day-care centers, wellness programs, and counseling for employee problems. Child Care Some companies provide on-site child care facilities or coverage of child-care expenses. Sick Pay Many businesses allow a certain number of days with illness with payment as usual. Leaves of Absence Some employers allow employees to temporarily leave their jobs for certain reasons, such as having children or completing their education, and return to their jobs at a later time. While you may not be paid while on leave, you have job security and permits you to take time off for important events in your life. The Family and Medical Leave Act allows employees to take up to 12 weeks of unpaid leave in a 12-month period for certain medical and family situations. Insurance Most large companies provide group health insurance plans for all employees. A few plans are paid entirely by the employer, but most plans require that the employee pay for part of their own coverage and for dependents. Health Insurance Typical 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. 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, Vision Insurance Coverage for routine exams and cleanings, prescription lenses and eye exams Bonuses and Stock Options Bonus- incentive pay based on quality of work done, years of service, or company sales or profits. Holiday bonuses are normally based on years of service. Stock-purchase options—give employees (usually executives) the right to buy a set number of shares of the company’s stock at a fixed price by a certain time. The employees gain as long as the stock price goes up. Pension and Savings Plans Pension plans are funded by the employer. When an employee retires, they receive a monthly check. Employees are fully vested (entitled to the full retirement account) after a specified period of time. In employer-sponsored savings plans, employees make contributions to the savings account. Employers have the option to contribute. 401k- private employers 403b- government employers Generally, withdrawing from savings plans before you retire will result in financial penalties. Travel Expenses Provide a company car or mileage allowances for use of your own car Evaluating Employee Benefits Generally, large companies provide more benefits than small companies. Cafeteria-style employee benefits are programs that allow workers to base their job benefits on personal needs (you can pick and choose your benefits) Lesson 6.2 Work Arrangements and Organizations Flexible Work Arrangements Altered Workweeks Flextime (flexible schedules)- allow employees to choose their working hours within defined limits. Employees must be present during a certain core period, but can choose the rest of their work hours around that period. Flextime is good for business because employees are responsible for working a full day regardless of when they arrive on the job. Employees experience greater job satisfaction because flextime helps them fulfill their personal needs. Compressed workweek- a work schedule that fits the 40-hour workweek into less than 5 days. Example: working 10 hours for 4 days, then having 3 days off Job Rotation- Job design where employees are trained to do more than one specialized task, and “rotate” from one task to another. Job rotation gives employees more variety in their work and allows them to use different skills. It reduces boredom and burnout, leading to greater job satisfaction. A major advantage of job rotation for both employer and employee is that information and ideas are freely exchanged among employees, so that everyone knows how to do each task. Job Sharing- job design in which two people share one full-time position, splitting the salary and benefits according to their contributions. Permanent Part-Time and Telecommuting Part time is 16-25 hours per week. Companies save when hiring part time employees on salary and benefits Telecommuting- employees who can work at home or on the road and stay in contact with their manager through email, phone, and fax Computer-related work is conducive to telecommuting. Labor Unions and Professional Organizations- many jobs require union membership Labor union- a group of people who work in the same or similar occupations, organized for the benefit of all employees in these occupations. Functions of Unions 1. 2. 3. 4. to recruit new members to engage in collective bargaining to support political candidates who are favorable to the union to provide support services for members Unions support their members by helping to keep them employed, negotiating wages, and working conditions, providing credentials for job seeking employees, and providing the education members need to obtain and keep jobs. The main function of unions is collective bargaining, which is the process of negotiating the terms of employment for union members. Terms of agreement are written into a contract. Contract spells out wages, benefits, hours of work, and grievance (a formal complaint that management has violated an aspect of the contract) procedure Seniority rights- policy in which the last person hired is the first person fired when jobs must be cut. If a union and employer cannot agree on contract terms, a mediator helps the parties reach an agreement. A strike occurs when the union refuses to work until an agreement is reached. Types of Unions Three types of unions: 1. craft- limited to those who practice that craft or trade (bricklayers, carpenters) 2. industrial- skilled, semiskilled, or unskilled employees in a particular place, industry, or group of industries (United Auto Workers], rubber, glass, machinery, etc) 3. public- municipal, county, state, or federal employees (firefighters, teachers, police) Public employee unions differ from the other two types in that they do not hire outside officersmembers act as representatives and officers Professional Organization- an organization of people in a particular occupation that requires considerable training and specialized skills. They establish and maintain professional standards and publish professional journals to help keep members up to date in their field. Through lobbying, professional organizations try to influence public officials to take political action that benefits the profession.
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