Unit 2 Personal Finance

Sonia worked 35 hours and earns $18.50 per hour. What is her gross pay?

$647.50

Kevin works for an hourly of $10. He gets paid 1.5x for overtime and he worked 60 hours last week. What is his gross pay?

$900

Name some of the methods used to pay an employee.

- Tips - Direct Deposit -Payroll - Checks - Paycheck - Paycheck Stub - Pay Period - Salary - Hourly Rate - Commissions - Contractor/ Consultant - Profit Sharing Plan - Full-time Employee - Overtime - Bonuses

List the 3 categories of compensation and state why an employer may choose that method of payment.

1. Tips, bonuses, and commission- make the business look better and bring in more money. 2. Paycheck and salary- secure method that attracts higher skilled workers 3. Hourly- Gives flexibility and helps keep business' cost down

Medicare

A federal government program that provides health insurance coverage for people who are 65 or older or have certain disabilities.

Social Security

A federal government program that provides monetary benefits to people who are retired or are disabled.

What is a W-2?

A summary of the employee's annual earnings and amount of taxes withheld

Tax Credit

An amount of money that you can subtract from the amount of taxes that you owe.

Full-Time Employment

An employee that works a set minimum number of hours (as set by the employer), typically 5 work days and 40 hours.

Dependent

An individual whom a taxpayer can claim for credits and/or exemptions because they provide the majority of support for that individual's living expenses.

Pay stub/ Paycheck Stub

Attached to the paycheck to show the deductions. Some examples of deductions include: Federal/State Withholdings, Social Security, medical and retirement plans.

George is a car salesmen. He has a base salary of $50,000. George also gets an additional sum of money for meeting the sales quota of total cars sold in a month. What is an additional sum known as?

Bonus

What is a W-4 form?

Employee's Withholding Allowance Certificate; information provided on the form determines the percentage of gross pay to be withheld for taxes.

What is the I-9 form?

Employment Eligibility Verification. Information gathered on this form is for employers to verify eligibility of individuals for employment.​ This form helps employers avoid hiring undocumented workers or people who are not eligible to work in the U.S. One must provide legal documents to verify eligibility, such as; birth certificate, passport, Social Security Card, driver's license.

What are the 3 levels of taxes?

Federal, State, and Local.

Taxes

Government fees on business and individual income, activities, products, or property.

What is another word for tip?

Gratuities

What is the difference between Net Pay and Gross Pay?

Gross Pay- amount earned before deductions. Net Pay- amount earned after deductions.

Overtime

Hours that exceed 40 hours in the normal workweek or work during holiday hours.

These are examples of this type of deduction: health, dental, vision, life, and disability.

Insurance

What is a payroll card? List some advantages and disadvantages of this types of payment method.

It is a prepaid card that is an alternative to paper check or depositing wages into a employee's account. Advantage- ATM Withdrawals Disadvantage- May have to pay associated fees

What is the difference of mandatory deductions and optional deductions? Give examples of each.

Mandatory Deductions- Deductions that you are required to pay. Examples: medicare, state withholdings, and federal withholdings Optional Deductions- Deductions that you can take out. Examples: Union Dues, insurance, and retirement plan

Tips

Money paid by customers to those who provide services.

Deductions

Money subtracted from gross pay for required taxes, employee insurance, and retirement benefits.

Allowances

Number of employee-claimed exemptions, typically the number of people one can claim as dependents, in determining income tax withholding.

When is overtime paid to an employee and how is it calculated?

Paid after working 40 hours; Hourly pay x 1.5 x overtime hours

What payment method includes a specific rate of pay multiplied by the length of time an employee puts in at work during a pay period?

Pay Period

What is incentive pay and who benefits from it?

Pay based on performance. It is a motivation factor for employees.

Compensation

Payment in the form of money, time, or benefits for completed work.

Prudential Corporation's profits are up in the fourth quarter, a % of this is give to the employees. What is this known as?

Profit Sharing Plan

These are examples of this type of deduction: pensions, 401k, 403b.

Retirement

If a prospective employer tells you that you will be paid annually $50,000, what type of compensation in this?

Salary

What is a contractor/consultant from an employer's perspective> How are they paid? How are they different from employees of the company?

Specialized worker hired a short or medium contract; they are paid under the table or hourly; they don't get any benefits

What is a 1099?

Tax form that reports other sources of income (such as bank account interest, investment dividends, or lottery winnings) earned in a tax year.

Federal Income Contributions Act (FIFCA)

The federal act under which mandatory contributions for Social Security and Medicare are deducted from one's pay.

IRS (Internal Revenue Service)

The federal agency responsible for administering and enforcing the U.S. Treasury Department's tax revenue laws through assessment and collection of taxes.

Pay Period

The length of time for which an employee's wages are calculated (weekly,bi-weekly, or monthly).

Most restaurants only pay their wait staff a minimal amount of hourly wage ($4 or less), the rest of the compensation for the service provided by the waitress comes in the form of this?

Tips

Exemptions

To be free from, or not subject to, taxation by regulators or government entities.

What does it mean to have your paycheck direct deposited? Identify a benefit of this option of payment method.

Your paycheck is put directly into your bank account; Benefit- Very secure method, as there is no direct handling of the check and the employee knows exactly which day the paycheck will be deposited/funds will be available.

What is commission?

income paid as a percentage of sales.

What is Gig Economy? Give some examples.

labor market where organizations rely on short-term contracted employees to complete tasks, with gig workers completing work within the confines of their own selected schedule. Some gig economy companies- Uber, Lyft, DoorDash, and InstaCart.