Unit
2
Show Me The Money
Gross Pay, Net Pay, and Benefits
Unit
Show Me The Money
Lesson 2.1
Gross Pay, Net Pay, and
Benefits
Learning Objectives
Compute gross pay and net pay.
List and describe employment benefits
and incentives.
SLIDE 3
Gross Pay, Deductions, and Net
Pay
Gross pay is the total amount you earn
before any deductions are subtracted.
Gross Pay – Deductions = Net Pay
A fixed hourly rate earned by employees
is a wage.
Overtime is time worked beyond your
regular hours. Typically over 40 hours.
A salary is a fixed annual amount of
gross pay.
Chapter 2
SLIDE 4
Minimum Wage Laws
Minimum wage
lowest rate by law
Federal minimum wage
rate as of July 2009 is
$7.25 per hour
President Proposed
increase to $10.10 in 2014
Illinois's minimum wage
rate as of January, 2013
is $8.25 per hour
Source:
2-1 Earned Income and Benefits
United States Department
of Labor
Slide 5
Income Calculations
Slide 6
A wage is pay for each hour worked.
Calculation: hours worked x hourly rate
Example:
Tom worked 32 hours last week. His hourly rate is $9.00.
What was his gross pay?
Regular Pay: (32 Hours * hourly rate) $ ____________________
32 X $9.00 = $288.00
Gross Pay Calculation
Gross pay with overtime
Overtime rate is 1½ times the regular
rate.
Regular Pay + Overtime Pay = Gross Pay
SLIDE 7
Example of Gross Pay
Calculations for Hourly Employee
Joe worked 48 hours last week. His hourly rate is $10.00.
What was his gross pay?
Type of Pay
Regular pay
Overtime pay
Gross pay
Hours
40 ×
8 ×
Rate
$10.00 per hour =
$15.00 per hour =
Amount
$400.00
120.00
$520.00
SLIDE 8
Example of Gross Pay
Calculations for Salaried Employee
Annual
Salary
÷
Pay Period
per Year
=
Monthly
$24,000
Twice a
month
$24,000
Every two
weeks (biweekly)
$24,000
÷
12
=
$2,000
÷
24
=
$1,000
÷
26
=
$923.08
Weekly
÷
52
=
$461.54
$24,000
Gross Pay per
Paycheck
SLIDE 9
Salary Calculations
Bi-Weekly Example:
Michael has just accepted his first fulltime job as a junior accountant. His salary
is $45,500 a year and he receives a paycheck every two weeks (bi-weekly).
Compute his biweekly gross pay.
Gross Pay ( Salary / 26)
$ ____________________
$45,500/26 = $1,750
Twice a Month Example:
Sylvia has just accepted a fulltime job as a secretary. Her salary is $30,000 year
and she receives a paycheck twice a month. Compute her paycheck gross pay.
Gross Pay ( Salary / 24)
$ ____________________
$30,000/24 = $1,250
SLIDE 10
Tip/Commission Calculations
Slide 11
A tip is a gift of money for a service.
A commission is a set fee or percentage of a sale.
Example:
Josh is the new manager of a computer shop in the mall. He received
a base yearly salary of $24,000 plus a sales bonus of 5%. This month
sales were $43,500. He gets paid monthly.
Compute his gross pay.
Salary ( Salary / 12)
$24,000/12 = $ 2,000
Commission ( Sales * 5%)
$43,500 * .05 = $ 2,175
Gross Pay ( Salary + Commission) $2,000 + $2,175 = $ 4,175
Deductions
Amounts subtracted from your gross pay
are called deductions.
Allowances are reductions in the amount
of tax withheld from your paycheck.
Some deductions, such as Social Security
tax and federal income tax, are required by
law.
Other deductions are optional.
SLIDE 12
Net Pay
When all deductions are taken out of
your gross pay, the amount left is your
net pay.
 Amount of your paycheck
 “Take-home pay”
 Amount you can actually spend as you wish
SLIDE 13
What Are Employee Benefits?
Slide 14
 Benefits :Forms of pay other than salary or wages.
 Types of Benefits
 Pay without work (vacation, holidays, sick leave)
 Sick leave is paid time away from work due to illness
 Personal leave is paid time away from work for personal reasons




Education
Perks
Insurance/HSAs
Retirement Plans
 Retirement plan is an account into which employees contribute a
portion of their earnings for their retirement
 Profit-Sharing plans/Stock Option Plans
BENEFITS AND INCENTIVES
SLIDE 15
Paid Vacation
Most businesses provide full-time
employees with a set amount of paid
vacation time.
While you are on vacation, you are paid
as usual.
The amount of vacation time often varies
with years of service.
SLIDE 16
Paid Holidays
 Paid holidays in the U.S. typically include
Christmas, Thanksgiving, Fourth of July, Labor
Day, and Memorial Day
 Other holidays that many companies grant are
New Year’s Day, Veterans Day, Martin Luther
King Day, and Presidents Day.
 An employee required to work on a holiday is
usually paid double or more than double the
regular hourly rate of pay.
SLIDE 17
Insurance
 Most large companies provide group insurance
plans for all employees.
 A few plans are paid for almost entirely by the
employer, as a part of employee compensation.
 Most plans require that employees pay for part of
their own coverage, as well as dependent coverage.
 Common types of insurance plans
 Group health insurance
 Group life insurance
 Group dental insurance
 Group vision insurance
SLIDE 18
Sick Pay
Many businesses also provide an
allowance of days each year for illness,
with pay as usual.
It is customary to receive three to ten
days a year as “sick days” without
deductions from pay.
SLIDE 19
Personal Days
Some employers allow personal days
(absences for personal reasons) so that
employees can attend to important
matters without calling in “sick” when
they aren’t sick.
SLIDE 20
Pension and Savings Plans
Pension plans are funded by the
employer.
Retired employees receive a monthly
check.
SLIDE 21
Employer-Sponsored Retirement
Savings Plans
Common plans
401(k) for private employers
403(b) for government employers
Employees put money in these accounts.
The employer may also (but is not
required to) contribute money to the
employee’s account.
SLIDE 22
Profit Sharing
 Profit sharing is a plan that allows employees
to receive a portion of the company’s profits at
the end of the corporate year.
 The more profits the company makes, the
more the company has to share with
employees.
 Profit sharing is considered incentive pay—
money offered to encourage employees to
strive for higher levels of performance.
SLIDE 23
Leaves of Absence
Some employers allow employees to
temporarily leave their jobs (without pay)
and return to their jobs at a later time.
There are often restrictions on the reason
for a leave, such as having children or
completing education.
Disadvantage: Unpaid
Advantage: Job security
SLIDE 24
Employee Services
 Employee services are extras that companies
offer to improve employee morale and working
conditions.
 Examples include:
 Employee discounts
 Social and recreational programs
 Free parking
 Tuition reimbursement for college courses
 Wellness programs
 Counseling for employee problems
SLIDE 25
Child Care
Onsite child-care facilities
Coverage of child-care expenses as a
part of employee benefit packages
SLIDE 26
Bonuses and Stock Options
Bonuses are incentive pay based on
quality of work done, years of service, or
company sales or profits.
Stock options give employees the right to
buy a set number of shares of the
company’s stock at a fixed price.
SLIDE 27