10.2
Wage and Salary
Increases
GOALS
 Calculate Cost-of-Living Adjustments
(COLA)
 Calculate bonuses
 Calculate profit sharing
BUSINESS MATH
© Thomson/South-Western
Lesson 10.2
Slide 1
Bonuses
 Some companies may give their employees a
bonus.
 A bonus is pay given to reward employees
who make a significant contribution to the
success of the company or whose work
record is exceptional.
 A rating system may be used to determine
which employees deserve bonuses.
(continued on the next slide)
BUSINESS MATH
© Thomson/South-Western
Lesson 10.2
Slide 2
Bonuses
(continued)
 Bonuses may be a stated dollar amount or a
percentage of an employee’s regular pay.
 They may also be given in addition to other
forms of pay raises, such as COLA.
 Bonuses may become a permanent part of an
employee’s pay or they may be only a onetime payment.
BUSINESS MATH
© Thomson/South-Western
Lesson 10.2
Slide 3
Profit Sharing
 Some companies offer profit sharing to their
employees.
 Profit sharing means that employees get part
of the profit earned by a company.
 An employee’s share is usually based on the
amount of profit and the number of
employees eligible for it.
 Employees share only in the profits of a
company, not its losses.
BUSINESS MATH
© Thomson/South-Western
Lesson 10.2
Slide 4
Profit Sharing Motivates
 The idea behind profit sharing plans is to
motivate employees to be productive, cut
costs, and make suggestions for
improvements because they benefit directly
from higher profits.
BUSINESS MATH
© Thomson/South-Western
Lesson 10.2
Slide 5
Profit Sharing—Cash
 Many profit sharing plans make payments in
cash to employees.
 Employees owe income tax on those
payments.
BUSINESS MATH
© Thomson/South-Western
Lesson 10.2
Slide 6
Profit Sharing—Pension
 Some profit sharing plans allow employees to
place their shares of the profits in pension
programs.
 When the pension plan is used, the payment
is not taxable until it is taken out at retirement.
BUSINESS MATH
© Thomson/South-Western
Lesson 10.2
Slide 7
BUSINESS MATH
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Lesson 10.2
Slide 8
BUSINESS MATH
© Thomson/South-Western
Lesson 10.2
Slide 9
BUSINESS MATH
© Thomson/South-Western
Lesson 10.2
Slide 10
BUSINESS MATH
© Thomson/South-Western
Lesson 10.2
Slide 11