Income, Employment Types, and Employee Benefits

Income is generally categorized into two distinct types: earned income and unearned income.
Unearned Income: This refers to money received without the performance of specific job duties or daily labor. Examples mentioned include:
- Winning the lottery.
- Making money on the stock market (capital gains or dividends).
- Rent paid by tenants to a landlord.
Earned Income: This is income acquired by individuals who go out to work each day and perform specific tasks or Provide services for their employers.

Definition of Wages: Wages are payments made to employees for every specific hour they work. A person who earns a set amount, such as $10.00$ per hour, is classified as a wage earner.
New Jersey Minimum Wage Specifics:
- As of January 1, 2020 ( $01/01/2020$ ), the minimum wage in New Jersey was set at $11.00$ per hour.
- Employers are legally prohibited from paying less than this rate to employees "on the books" (those on the payroll with taxes withheld).
- The state of New Jersey mandated an annual increase of $1.00$ per hour each year through the year $2024$ .
- For example, in $2021$ , the minimum wage rose to $12.00$ per hour.
Exceptions and Different Rules: Delivery personnel, waitresses, and other service workers often have different wage structures due to the inclusion of tips.

Full-Time Employment Definition: A full-time employee is defined as someone who works $40$ hours per week. This can be structured as:
- $8$ hours per day, $5$ days per week.
- $10$ hours per day, $4$ days per week.
Overtime Eligibility: Any work performed beyond the standard $40$ -hour work week is considered overtime.
- Employees must agree to work overtime; an employer cannot force it.
- Overtime compensation is required for wage earners and is calculated at a rate of at least "time and a half," or $1.5 \times$ the regular hourly rate.
Step-by-Step Overtime Calculation Example:
- Regular Pay: If an employee works $40$ hours at a regular rate of $9.00$ per hour:
  - $9 \times 40 = 360$
  - Regular Pay: $360.00$
- Calculating the Overtime Rate:
  - Identify the regular rate: $9.00$
  - Calculate half of the regular rate: $\frac{9.00}{2} = 4.50$
  - Add the half back to the regular rate: $9.00 + 4.50 = 13.50$
  - The Overtime Rate is $13.50$ per hour.
- Calculating Overtime Pay: For $5$ hours of overtime worked:
  - $13.50 \times 5 = 67.50$
- Total Gross Income (Before Taxes):
  - $360.00 + 67.50 = 427.50$
Critical Warning: The most common error in calculation is forgetting to add the half-rate back to the original rate. Overtime pay must always be higher than the regular hourly rate.

Definition of Salary: Salaried workers are paid a fixed yearly amount rather than an hourly rate. This total is divided into equal portions based on the number of pay periods in a year.
Pay Period Example (Teachers):
- Teachers often get paid twice a month for $10$ months.
- This results in $20$ pay periods per year.
- They do not receive paychecks during the summer months.
- If a teacher makes $30,000.00$ a year, the per-check amount before taxes is calculated as: $\frac{30,000}{20} = 1,500.00$
Hours and Time Cards: Salaried employees are generally not required to keep time cards or track specific hours.
- They may work anywhere from $30$ to $60$ hours a week for the same pay.
- Employers may use salary status to have management staff work long hours (e.g., $60$ hours/week) without paying overtime, as salaried workers are often ineligible for overtime pay.

Tips: Workers such as delivery drivers, waiters, and waitresses often have a lower base minimum wage because they are expected to supplement their income with tips.
- Tax Obligation: All tips must be claimed as income. The government requires these to be reported for taxation; individuals cannot claim they only made their base hourly wage (e.g., $4.00$ per hour).
Commissions: Common in sales positions like real estate or car sales. A commission is a percentage of a total sale.
- Example: A real estate agent might receive a commission of $10\%$ of the total sale price of a house.

Entrepreneur: An individual who takes the risk of being self-employed and owning their own business.
Advantages of Entrepreneurship:
- Freedom from external direction; you are your own boss.
- Ability to make all business decisions independently.
- Retention of all profits after expenses are paid.
- High profit potential if the business is successful.
Disadvantages of Entrepreneurship:
- High Risk: Approximately one third ( $\frac{1}{3}$ ) of all new businesses fail within the first $5$ years.
- Financial Liability: If the business is not a corporation, personal assets (home, car) can be seized to pay business debts/bankruptcy.
- Long Hours: Entrepreneurs often work $7$ days a week and long hours to keep the business running until it is profitable enough to hire staff.

Definition of Benefits: Forms of compensation provided by an employer other than direct wages or salary.
Pay Without Work:
- Vacation days.
- Paid holidays.
- Sick days (e.g., teachers receive $10$ sick days per year).
Education and Training: Employers may pay for further education or training to create a more skilled workforce.
Perks (Minor Benefits):
- Assigned parking spots (highly valued in congested areas like New York City).
- On-site daycare centers.
- Flex Time: A policy where the specific hours worked (e.g., $7:00$ to $15:00$ vs. $9:00$ to $17:00$ ) do not matter as long as the work is completed.
Essential Long-term Benefits:
- Health Insurance: Essential due to the high cost of surgery and doctor visits.
- Retirement Plans: Including pensions or $401(k)$ plans, ensuring financial comfort after one stops working to cover ongoing costs like food and utilities.