Getting Paid -> In depth Pay Stub

What are the two primary sources of employment?

1. Hired by a business or an employer

2. Self-employed

Salary vs. Hourly

Salary

• Set amount of money

• Not dependent on the specific # of hrs worked

  • ex: $30,000/yr

Hourly wage

• Earn a specific rate for every hr worked

  • ex: $16.00/hr

• Minimum wage - Federal and state

***If you cannot get the work done in a certain amount of time, you have to work over that and it does not mean you will get compensated

What methods do employers use to pay employees?

• Paper paycheck

• Direct deposit

  • Need to give the employer your routing #

(Payroll Card)

• (Functions similar to a debit card, except not linked to employee’s personal account

• Wages electronically loaded each payday

• Fees are common)

How often will I get paid?

• Weekly: 52 pay periods a year

• Bi-weekly: 26 pay periods a year

• Bi-Monthly: 24 pay periods a year

• Monthly: 12 pay periods a year

Payroll deducations

Gross income: amount of money earned before payroll taxes -

Deductions

• Mandatory = Income: Federal, State

• Optional = Payroll: Social Security, Medicare → FICA

= Net income: take home pay

(Why are income and payroll taxes deducated from wages?)

(helps manage personal tax liability on an ongoing basis)

Federal Income Tax

Largest required deduction

Amount of money earned + Information on Form W-4 = Amount deducted

What is a Form W-4?

Martial status + Dependents (child) → Determines the amount of pay that will be deducted for federal income taxes

W-2 vs. W-4

• W4 is when you get hired ***important to keep this up-to-date

• W2 is when you file income tax; tax deductions

I-9 Form

to verify the identity and employment authorization of individuals hired for employment in the United States

What are optional payroll deducations?

Employee benefits: products or services that add extra value for employees beyond wages earned →

• Employee’s portion of the cost is deducted →

  • Insurance

  • Retirement plans

  • Flexible spending accounts

***Employee will typically pay much less than privately purchasing that same benefit

How Employers Further Support Employees

Paid or unpaid days for illness, personal, holidays AND Match contributions to Social Security and Medicare

Workers’ compensation

• Helps pay medical expenses if you are injured on the job

Unemployment insurance

• You can receive this if you lose your job due to no fault of your own

***Both required at no cost to the employee

Can employer pay employees in cash?

Ensure employer is deducting income and payroll taxes from wages paid in cash

If taxes are not deducted from your wages you:

• Are not managing your tax liability

• Will be responsible for tracking the amount of money made and paying those taxes

• Are probably not receiving worker’s compensation and unemployment insurance coverage

Summary

• Employers make deductions to wages (outlined on the pay stub)

• Deducting payroll and income taxes on a “pay as you go” system helps manage your personal tax liability

• Being employed provides additional benefits beyond wages earned

• Employers are required to pay unemployment insurance and worker’s compensation

• Employers may offer employee benefits that save the employee money