Money Management. Unit CHAPTERS. 6 Pay, Benefits, and Working Conditions. 7 Federal Income Tax. 8 Budgets and Financial Records

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1 Uit 2 Moey Maagemet CHAPTERS 6 Pay, Beefits, ad Workig Coditios 7 Federal Icome Tax 8 Budgets ad Fiacial Records 9 Checkig Accouts ad Bakig Services CASE: Robert (Ted) Turer PROJECT: Assessig Your Fiacial Health 112 Copyright 2010 Cegage Learig, Ic. All Rights Reserved. May ot be copied, scaed, or duplicated, i whole or i part.

2 Photodisc/Getty Images Uit 2 begis with a examiatio of your paycheck ad beefits, treds i the workplace that affect your career, ad opportuities for advacemet. The you will lear about preparig your icome tax. Next you will study fiacial maagemet, begiig with preparig budgets ad other fiacial records. You will also fid out about iformal ad formal cotracts that you eter ito daily. Fially, you will lear how to use a checkig accout, icludig writig checks, keepig a checkbook register, ad recocilig your accout. You will discover how to choose the right bak ad services that meet your eeds. 113 Copyright 2010 Cegage Learig, Ic. All Rights Reserved. May ot be copied, scaed, or duplicated, i whole or i part.

3 Chapter 6 Pay, Beefits, ad Workig Coditios 6.1 Uderstadig Pay ad Beefits 6.2 Work Schedules ad Uios Cosider THIS Erique just got a job. Whe he was hired, his employer provided a packet cotaiig all kids of iformatio, from uio membership to sick pay. He will receive two weeks of paid vacatio every year, after his first year of employmet. The compay allows te paid sick days per year ad will grat a leave of absece i the case of pregacy or death of a family member. It also offers a 401(k) pla, which allows employees to make cotributios to a savigs accout to help pla for retiremet. Also provided for employees is a full package of group health, detal, visio, ad life isurace coverage. I additio, the compay has a child-care facility, altered workweeks, ad job sharig. Wow, I m goig to eed to read that etire packet, Erique thought to himself. There are a lot of thigs I eed to uderstad. 114 Uit 2 Moey Maagemet

4 6.1 Uderstadig Pay ad Beefits GOALS Compute payroll deductios ad et pay. Idetify optioal ad required employee beefits. TERMS gross pay, p. 115 overtime, p. 115 deductios, p. 117 et pay, p. 117 self-employmet tax, p. 121 icetive pay, p. 121 vested, p. 123 GROSS PAY, DEDUCTIONS, AND NET PAY Whe you take a job, you agree to perform certai tasks i exchage for regular pay. Gross pay is the total amout you ear before ay deductios are subtracted. If you work for a hourly wage, ay overtime pay you eared durig the pay period must be added to your regular pay to determie your gross pay. HOURLY WAGES Figure 6.1 shows a paycheck for Shari Gregso, who works for $8.00 per hour. Her employer keeps a record of the hours she works. For this pay period, she worked 40 regular hours. To determie Shari s pay for regular hours worked, multiply the pay rate by the umber of hours: OVERTIME Rate Hours Worked ¼ Gross Pay $8:00 40 hours ¼ $320:00 Shari also worked 4 hours of overtime durig this pay period. Overtime is time worked beyod the regular hours. A stadard workday is 8 cotiuous hours with scheduled paid breaks plus a upaid luch period. A stadard workweek is 40 hours i a five-day period of 8 hours each day. Accordig to the Fair Labor Stadards Act, employers must pay hourly employees overtime at the rate of 1½ times the regular rate. Shari s overtime rate is $12.00 a hour (8.00 1½). Her gross pay is computed as follows: Regular Pay þ Overtime Pay ¼ Gross Pay 40 hours $8:00 a hour ðregular payþ $320:00 4 hours $12:00 a hour ðovertime payþ þ 48:00 Gross pay $368:00 Shari s gross pay appears uder Gross at the bottom left of her paycheck stub. The letters YTD mea year-to-date. The amouts o this lie are cumulative totals up to this poit i the year. Chapter 6 Pay, Beefits, ad Workig Coditios 115

5 FIGURE 6.1 Paycheck with Stub Marshall Maufacturig Co. 14 Ault Street, Bates, OR PAYROLL CHECK Co. Code Departmet File No. Clock No. ID Social Security No. TO THE ORDER OF Pay Date Check No. R&T A SHARI GREGSON BELOW PAY THIS AMOUNT NET PAY Two hudred forty-four ad 34/100 dollars $ BATES BANK BATES, OREGON SHARI GREGSON 1133 ELM STREET, BATES, OR DISBURSING AGENT FOR ABOVE EMPLOYER Jermaie Davis AUTHORIZED SIGNATURE Marshall Maufacturig Co. 14 Ault Street, Bates, OR Co. Code Departmet File No. Fed. Status Name Pay Period Edig Pay Date R&T A GREGSON, SHARI Hours Uits Rate Earigs Type Deductio Type Deductio Type REG 2500 CR UN OT 1650 H INS 300 UN DUES This Pay YTD Gross Fed. With. Tax State With. Tax Social Security Medicare Other Deductios Net Pay , Uit 2 Moey Maagemet SALARY Perhaps you will work for a salary rather tha a hourly wage. Salaried employees usually do ot receive additioal pay for overtime work. Therefore, your gross pay would be the same as your salary. Your salary may be stated as a aual (yearly) amout. Your employer will divide the aual salary ito equal amouts to be paid each pay period. If you work for $24,000 a year ad are paid mothly, your gross pay per paycheck will be $2,000 ($24,000 12). If you are paid every two weeks, your gross pay per paycheck will be $923.08, calculated as follows: 52 Weeks i a Year 2 Weeks per Pay Period ¼ 26 Pay Periods $24, Pay Periods ¼ $923:08 per Paycheck If you were paid twice a moth rather tha every two weeks, you would receive oly 24 paychecks (12 moths i a year 2 paychecks per moth).

6 DEDUCTIONS Amouts subtracted from your gross pay are called deductios. Some deductios, such as Social Security tax ad federal icome tax, are required by law. Other deductios are optioal. For example, you ca have your employer deduct a amout to deposit ito your compay-sposored savigs accout. I Figure 6.1, Shari has deductios for a credit uio paymet, health isurace, ad uio dues. Employers are required to keep detailed records of wages eared ad hours worked for ispectio by the Departmet of Labor. With each paycheck, you will receive a detailed list of all deductios take from your gross pay. Optioal deductios may ot be withheld without your writte coset except by court order. This does ot apply to taxes, Social Security, ad other deductios required by law to be withheld from all paychecks. NET PAY Whe all deductios are take out of your gross pay, the amout left is your et pay. It is the amout of your paycheck, which is ofte referred to as take-home pay. It is the amout you ca actually sped as you wish. Stated mathematically: Regular Pay ðwages or SalaryÞþOvertime Pay ¼ Gross Pay Gross Pay Deductios ¼ Net Pay Figure 6.2 shows Shari Gregso s withholdig sheet. It lists weekly gross pay, deductios, ad et pay. Save your withholdig sheets or paycheck stubs that list the amouts withheld from your gross pay. You ca use these to check the accuracy of the Form W-2 your employer gives you for your icome tax retur. Required deductios iclude federal, state, ad local icome taxes, as well as Social Security ad Medicare taxes. I Figure 6.1, the deductios for Shari appear at the bottom of the paycheck stub. Photodisc/Getty Images Why would a employer track the umber of hours that a employee works? GLOBAL View Article 7 of Mexico s Federal Labor Law requires employers to employ at least 90 percet Mexica workers i their eterprises. All techical ad professioal workers must be Mexica, uless there are o Mexica workers qualified i a particular specialty. I that case, the employer may employ foreig workers, but oly to the extet of 10 percet of the labor force egaged i the specialty. The employer ad the foreig workers are required to trai the Mexica workers i the specialty. Article 7 is ot applicable to compay directors, admiistrators, ad geeral maagers. THINK CRITICALLY Does Article 7 help or hider developmet of the Mexica workforce? What might be its impact o emigratio from foreig coutries to Mexico? Chapter 6 Pay, Beefits, ad Workig Coditios 117

7 FIGURE 6.2 Employee Withholdig Sheet EMPLOYEE WITHHOLDING SHEET Employee Name Shari Gregso Social Security Number Pay Period: x weekly bimothly mothly Number of allowaces: 1 married x sigle GROSS PAY 1. Regular Wages: 40 hours at $ 8.00 /hr. = $ or 2. Regular Salary: 3. Overtime: 4 hours at $ 12.00/hr. = GROSS PAY $ = REQUIRED DEDUCTIONS 4. Federal Icome Tax (use tax tables) 5. State Icome Tax (use tax tables) 6. Social Security Tax (use 6.2% gross pay, up to $87,900) 7. Medicare Tax (use 1.45% gross pay) $ OTHER DEDUCTIONS 8. Isurace 9. Uio Dues 10. Credit Uio 11. Savigs 12. Retiremet 13. Charity 14. Other: TOTAL DEDUCTIONS (total lies 4 through 14) NET PAY (subtract total deductios from gross pay) $ $ The amouts to be withheld are determied from tax withholdig tables. Figure 6.3 shows part of the weekly withholdig table for the state of Orego. Figure 6.4 shows part of the weekly federal withholdig tax table. If you were paid mothly, you would use tax tables provided for a mothly pay period. To determie the proper amout to withhold, first idetify the appropriate withholdig table for your pay period. For example, Shari Gregso i Figure 6.2 is beig paid weekly, so you ca use the weekly table i Figure 6.3 to fid her state withholdig. Move your figer dow the left side of the table to the rage that icludes the employee s gross pay. Shari s gross pay of $ falls i the table s rage of $360 $380. The ru your figer to the right util you get to 118 Uit 2 Moey Maagemet

8 FIGURE 6.3 State Tax Withholdig Table Weekly Payroll Weekly payroll period (Orego) Amout of tax to be withheld Wage Number of Withholdig Allowaces But Two or Less Three or More At Less Sigle Married Sigle or Married Least Tha the proper umber of allowaces ad marital status. Shari s form shows that she is sigle ad claims 1 allowace. I Figure 6.3, the umber that falls i the colum for a sigle perso with 1 allowace, makig betwee $360 ad $380, is $21. Notice that $21 shows i the state icome tax lie o Shari s withholdig sheet. Followig the same process, you ca fid Shari s federal withholdig from Figure 6.4. Try it. Did you fid the umber $30 i the table, as show o Shari s withholdig sheet for federal icome tax? The Social Security deductio is withheld at the stadard rate of 6.2 percet of the first $102,000 (for 2008). The Medicare tax deductio is withheld at the rate of 1.45 percet of all pay eared. Employers must cotribute matchig amouts ito each employee s Medicare ad Social Security accouts. For example, Figure 6.2 shows Shari s Medicare tax withholdig as $5.34 this week. As a result, Shari s employer will also cotribute $5.34 ito Shari s Medicare accout. Cogress periodically icreases the withholdig rate ad maximum amout as eeded to keep eough tax moey comig i to pay Social Security beefits. I additio to required deductios, the optioal deductios a employee has authorized will be subtracted from gross pay to arrive at et pay. The most commo of these deductios are isurace paymets, uio dues, credit uio paymets, savigs deposits, retiremet cotributios, ad charitable cotributios. Chapter 6 Pay, Beefits, ad Workig Coditios 119

9 FIGURE 6.4 Federal Tax Withholdig Table Weekly Payroll SINGLE Persos WEEKLY Payroll Period (For Wages Paid i 2008) If the wages are Ad the umber of withholdig allowaces claimed is At least But less tha The amout of icome tax to be withheld is $0 $55 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $ Uit 2 Moey Maagemet SELF-EMPLOYED REQUIREMENTS People who are self-employed do ot have employee deductios ad withholdigs. Istead, they must make estimated tax paymets quarterly (four times durig the year). To do this, self-employed people estimate the total amout they will owe i taxes for the comig year. They divide this umber by 4 to determie the amout to pay each quarter. The IRS credits each paymet toward their tax obligatio for the year. Like other workers, self-employed people must pay Social Security tax ad Medicare tax. However, sice self-employed people are both employee ad employer, they must pay both the employee ad employer-matchig cotributios

10 to Social Security ad Medicare. Thus, for Social Security tax, self-employed people pay 12.4 percet of gross icome (6.2% 2). For Medicare tax, they pay 2.9 percet (1.45% 2). The total of 15.3 percet is called the selfemploymet tax. It is the total Social Security ad Medicare tax, icludig employer-matchig cotributios, paid by people who work for themselves. BENEFITS AND INCENTIVES May employers offer beefits, which are forms of employee compesatio i additio to pay. Commo beefits iclude health isurace, retiremet savigs plas, pesio plas, paid sick leave ad vacatios, ad profit sharig. Some of these beefits are required by law (such as uemploymet compesatio, workers compesatio, ad matchig Social Security ad Medicare taxes). Others are at the optio of the employer. Beefits are ofte offered to full-time employees oly. PROFIT SHARING Profit sharig is a pla that allows employees to receive a portio of the compay s profits at the ed of the corporate year. The more profits the compay makes, the more the compay has to share with employees. Profit sharig is cosidered icetive pay moey offered to ecourage employees to strive for higher levels of performace. Employers offer profit sharig because it liks part of employee pay with compay profit goals, givig employees a icetive to work harder ad reduce iefficiecies. PAID VACATIONS AND HOLIDAYS Most busiesses provide full-time employees with a set amout of paid vacatio time. This meas that while you are o vacatio, you are paid as usual. It is ot ucommo to receive a week s paid vacatio after a year of fulltime employmet, two weeks after two years, three weeks after five years employmet, ad so o. A beefit that you are likely to receive for ay full-time job is paid time off for holidays. Paid holidays typically iclude: Christmas Thaksgivig Fourth of July Labor Day Memorial Day Other holidays that may compaies cosider paid holidays are New Year s Day, Veteras Day, Marti Luther Kig Day, ad Presidets Day. A employee required to work o a holiday is usually paid double or more tha double the regular hourly rate of pay. EMPLOYEE SERVICES Employee services are the extras that compaies offer i order to improve employee morale ad workig coditios. May compaies offer employee discouts, social ad recreatioal programs, free parkig, tuitio reimbursemet for college courses, welless programs, ad couselig for employee problems. Chapter 6 Pay, Beefits, ad Workig Coditios 121

11 CHILD CARE Child care is a major issue for workig parets. May compaies provide osite child-care facilities as well as coverage of child-care expeses as a part of employee beefit packages. I years to come, federal laws are likely to iclude more child-care icetives for employers of workig parets. SICK PAY May busiesses also provide a allowace of days each year for illess, with pay as usual. It is customary to receive three to te days a year as sick days without deductios from pay. LEAVES OF ABSENCE Some employers allow employees to temporarily leave their jobs (without pay) for certai reasos, such as havig childre or completig their educatio, ad retur to their jobs at a later time. While a leave of absece may be upaid, it has a importat advatage: it gives job security ad permits you to take time off for importat evets i your life. I additio, employers sometimes allow persoal days (abseces for persoal reasos) so that employees ca atted to importat matters without callig i sick whe they are t sick. INSURANCE What types of group isurace plas do employers usually offer? 122 Uit 2 Moey Maagemet Most large compaies provide group isurace plas for all employees. (All kids of group isurace are covered i more detail i Chapter 27.) A few plas are paid for almost etirely by the employer, as a part of employee compesatio. Most plas require that employees pay for part of their ow coverage, as well as to cover depedets (spouse ad childre). Image Source/Getty Images Group Health Isurace. Most employers provide full-time employees with oe or more optios for group health isurace plas. Group Life Isurace. May compaies offer group life isurace. However, whe you leave your curret employmet, the group policy may ot go with you. The employer may pay a amout each moth for stadard coverage for each employee. Employees who wat additioal coverage ofte ca pay for it through payroll deductios.

12 Group Detal Isurace. Most detal plas provide a maximum beefit per year per family member. Orthodotia (braces) ofte is ot covered. Group Visio Isurace. Visio isurace covers the cost of prescriptio leses ad eye examiatios oce every few years. BONUSES AND STOCK OPTIONS Bouses are icetive pay based o quality of work doe, years of service, or compay sales or profits. Holiday bouses are ofte based o years of service. If a compay reaches its sales ad profit goals i a year, employees may receive bouses to reward their efforts i achievig those goals. Stock optios give employees the right to buy a set umber of shares of the compay s stock at a fixed price. The employees beefit as log as the stock price goes up. May types of stock optio plas exist. PENSION AND SAVINGS PLANS Some employers provide pesio plas for retiremet. Pesio plas are fuded by the employer. Whe a employee retires, he or she receives a mothly check. Employees become vested (etitled to the full retiremet accout) after a specified period of time, such as five years. Employer-sposored retiremet savigs plas iclude the 401(k) for private employers or a 403(b) for govermet employers. Employers do ot bear the full cost of these plas, ad as a result, may compaies are switchig from pesios to these savigs plas. Employees put moey aside i these accouts; the employer may also (but is ot required to) cotribute moey to the employee s accout. Geerally, withdrawig fuds from savigs plas before retiremet will result i fiacial pealties. However, some 401(k) plas allow employees to take out loas without pealty based o certai restrictios. TRAVEL EXPENSES Compaies that require employees to travel i the course of their work ofte provide a compay car or a mileage allowace if employees use their ow car. Geerally, car isurace, gasolie, ad repair ad maiteace expeses for the compay automobile are also provided. While out of tow, employees may receive a daily allowace to cover their hotel, meals, ad other travel expeses. I some cases, expeses may be charged to a compay credit card. Other times, employees will have to submit a expese report alog with receipts for reimbursemet at a later date. EVALUATING EMPLOYEE BENEFITS May of these optioal beefits are of great value to employees. Beefits geerally are ot taxable to employees (except bouses ad other beefits paid i cash), yet they provide valuable coverage ad advatages. Geerally, large compaies provide more extesive optioal beefits tha do small compaies. I recet years, employee beefits have bee expaded to meet the eeds of differet life situatios. Cafeteria-style employee beefits are programs that allow workers to select from a rage of employer-paid beefits up to a certai total value, based o persoal eeds. Flexibility i the selectio of beefits has become quite commo. For example, a married employee with childre might opt for icreased life ad health isurace, while a sigle paret may choose child-care services. Chapter 6 Pay, Beefits, ad Workig Coditios 123

13 *Gajeder* D:/Temp_Dailyproductio/Rya_120640/z_productio/z_3B2_3D_files/rya_ _ch06.3d, 22/12/08/19:41:22, 19:41, page: 124 Plaig a Career i... Payroll Payroll clerks may work i huma resource departmets, or they may work for large corporatios that specialize i outsourced payroll services. Wherever they work, they perform vital fuctios esurig that employees get paid o time ad that their pay is accurate. Payroll clerks are foud i or for every busiess or idustry. Workers trai o the job ad have very good computer skills. They process large amouts of data ad perform a variety of tasks, from eterig data to preparig federal tax forms (for reportig payroll ad its deductios). The work of payroll clerks is more difficult with the advet of ew types of work beefits, from 401(k) accouts to HSAs (Health Savigs Accouts). They must always be o top of chage. Employmet Outlook l Slower tha average employmet growth is expected. Job Titles l l l Payroll clerk Timekeepig clerk Payroll office specialist Needed Skills l l l A high school diploma or GED is required. Excellet computer skills ad a aptitude for math are eeded. Good iterpersoal ad commuicatio skills are helpful. What's it like to work i... Payroll Caroly works a typical 40-hour week job. She sometimes works overtime if a ew payroll cotract is siged. As a payroll specialist for a large corporatio that provides outsourced payroll services, Caroly kows the importace of doig accurate work ad meetig deadlies. Her cubicle looks a lot like that of the other 45 workers o her floor of the office buildig. It s clea, pleasat, ad comfortable. Her computer is state-of-the-art. She kows the best ad ewest software programs available i the payroll idustry. Caroly uderstads the eed for privacy ad cofidetiality. Her work ivolves very sesitive iformatio about employees for may compaies. I her spare time, Caroly is preparig to take a exam to become certified. A CPP (certified payroll professioal) is a desigatio that will brig her a raise ad possibly a promotio. After three years o the job, she is eager to move ito a supervisory role. What About You? Do you have a aptitude for math ad accoutig? Do you like learig to use ew computer programs? Would you cosider a career i payroll? 124 Uit 2 Moey Maagemet

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15 6.1 Assessmet KEY TERMS REVIEW Match the terms with the defiitios. 1. Time worked beyod the regular hours 2. Moey offered to ecourage employees to strive for higher levels of performace 3. Amouts subtracted from gross pay 4. The total amout eared before ay deductios are subtracted 5. The amout left after deductios are take out of gross pay a. deductios b. gross pay c. icetive pay d. et pay e. overtime f. self-employmet tax g. vested 6. The poit at which employees have full rights to their retiremet accouts 7. The total of 15.3 percet for Social Security ad Medicare tax paid by people who work for themselves CHECK YOUR UNDERSTANDING 8. What is icluded i gross pay? List optioal ad required deductios from gross pay. 9. What are some employee beefits ad icetives provided at may workplaces? APPLY YOUR KNOWLEDGE 10. Based o the followig iformatio, compute gross pay: Regular hours worked are 40; overtime hours worked are 5. Regular rate of pay is $8.55 per hour. THINK CRITICALLY 11. Some people work for compaies because they wat lots of overtime. Other people avoid jobs that require overtime. While overtime hours pay 1½ times the regular rate, they take away persoal time. What is your positio regardig overtime? Explai your aswer. 12. Employee beefits are worth a large sum ad, i some cases, are more importat to workers tha the amout of take-home pay. List beefits that are of value to you, i order of importace. Give a reaso for each choice. Chapter 6 Pay, Beefits, ad Workig Coditios 125

16 6.2 Work Schedules ad Uios GOALS Describe flexible work arragemets for employees. Describe the role of uios ad professioal orgaizatios. TERMS flextime, p. 126 compressed workweek, p. 127 job rotatio, p. 127 job sharig, p. 127 labor uio, p. 128 collective bargaiig, p. 128 seiority, p. 128 lobbyig, p. 129 FLEXIBLE WORK ARRANGEMENTS May employers are respodig to the chagig lifestyles ad eeds of their employees. By desigig more flexible jobs, employers ca reduce abseteeism, burout, ad turover. ALTERED WORKWEEKS May firms have experimeted with altered workweeks to get away from the stadard eight-hours-a-day, five-days-a-week work schedule. Flextime Flexible schedulig, or flextime, is a type of work schedule that allows employees to choose their workig hours withi defied limits. Flextime plas geerally require all employees to be preset durig a core time period. Employees ca the choose the rest of their work hours aroud this core period. Employees egotiate their startig times, usually withi a three- to four-hour period. They may begi workig as early as 6 a.m. or as late as 9 or 10 a.m. Eve though startig times are flexible, most employers require employees to work a set umber of hours per day. For example, a perso arrivig at 6 a.m. would be fiished by 3 p.m. (havig a oe-hour upaid luch break), while a perso arrivig at 10 a.m. would be fiished at 7 p.m. The core time period is a crucial time durig the day whe all employees must be workig. This core period may be betwee 10 a.m. ad 3 p.m., the peak hours for busiess activity. Flextime is good for busiess because employees are resposible for workig a full day regardless of whe they arrive o the job. Employees experiece greater job satisfactio because flextime helps them fulfill their persoal eeds. For example, employees who eed to pick up childre from school would fid it coveiet to be off at 3 p.m. Flextime also allows for the schedulig of medical or other appoitmets, ad it reduces stress caused by the pressure of meetig strict work schedules. 126 Uit 2 Moey Maagemet

17 Compressed Workweek A compressed workweek is a work schedule that fits the ormal 40-hour workweek ito less tha five days. The typical compressed workweek is te hours a day for four days, followed by three days off. Some types of work are better suited to a compressed schedule tha are others. For example, some kids of streuous physical or metal work are probably ot suitable for a compressed workweek. JOB ROTATION Job rotatio is a job desig i which employees are traied to do more tha oe specialized task. Employees rotate from oe task to aother. Job rotatio gives employees more variety i their work ad allows them to use differet skills. It reduces boredom ad burout, leadig to greater job satisfactio. A major advatage of job rotatio for both employer ad employee is that iformatio ad ideas are freely exchaged amog employees, so that everyoe kows how to do each task. If oe worker is abset, aother ca take over ad keep the work flowig. JOB SHARING Job sharig is a job desig i which two people share oe full-time positio. They split the salary ad beefits accordig to each perso s cotributios. Job sharig is especially attractive to people who wat part-time work. By satisfyig employees eeds for more persoal time, job sharig reduces abseteeism ad tardiess, lowers fatigue, ad improves productivity. PERMANENT PART-TIME May employees choose to work oly part time (16 25 hours a week). Compaies ca save o salary ad beefits by hirig permaet part-time employees. Part-time work usually provides some beefits to the employee, such as job security, while allowig freedom to sped more time away from work. Parets with small childre, older employees, ad others may fid that permaet part-time work best meets their eeds. Digital Visio/Getty Images Why would a worker wat to participate i job sharig? TELECOMMUTING Advaces i techology have made telecommutig possible. Telecommuters ca work at home or o the road ad stay i cotact with their maager ad coworkers through , fax, ad cell phoe. They may participate i meetigs through videocoferecig techology, allowig them to see ad iteract with other meetig participats. Employees who telecommute ofte do computer-related work, such as data etry, Web desig, iformatio processig, or software developmet. Workig at home is coveiet ad gives the worker flexibility. Telecommutig does ot work well i jobs that Chapter 6 Pay, Beefits, ad Workig Coditios 127

18 require frequet face-to-face iteractio amog employees or that require employees to work together i oe place to create a product. LABOR UNIONS AND PROFESSIONAL ORGANIZATIONS May jobs ivolve uio membership or participatio i a professioal orgaizatio as a requiremet of employmet. Uios are groups of people joied together for a commo purpose. A labor uio is a group of people who work i the same or similar occupatios, orgaized for the beefit of all employees i these occupatios. FUNCTIONS OF UNIONS Labor uios have four major fuctios: Recruit ew members Egage i collective bargaiig Support political cadidates who support members iterests Provide support services for members Starbucks Coffee Compay is the largest coffee chai i the world. The Starbucks Workers Uio is a orgaizatio of Starbucks employees uited to improve their wages ad workig coditios. Access pfiace/mypf ad click o the lik for Chapter 6. Browse the uio home page ad list some of the uio s specific goals. With which larger labor orgaizatio is the Starbucks Workers Uio affiliated? (Hit: Click the About Us lik at the left of the home page.) Do you thik Starbucks workers are justified i watig to uioize? Explai Uit 2 Moey Maagemet Uios support their members by helpig to keep them employed, egotiatig wages ad workig coditios, providig credetials for job-seekig employees, ad providig the traiig members eed to obtai ad keep jobs. The mai fuctio of uios is collective bargaiig, which is the process of egotiatig a work cotract for uio members. Terms of the cotract set workig coditios, wages, overtime rates, hours of work, ad beefits. The cotract also spells out a grievace procedure. A grievace is a formal complait, by a employee or by the uio, that the employer has violated some aspect of the work cotract. Work cotracts ofte provide for seiority rights. Seiority refers to the legth of time o the job ad is used to determie trasfers, promotios, ad vacatio time accordig to most uio cotracts. Uder this policy, the loger you work for a employer, the more job security you have. If layoffs become ecessary, the most recet hires will be the first to lose their jobs. Whe the uio ad employer caot agree o the terms of a ew cotract, the dispute ca be mediated. Through mediatio, a eutral third party (the mediator or arbitrator) helps the two parties reach a compromise. If they still caot agree, the uio may decide to strike, or refuse to work util a agreemet is reached. TYPES OF UNIONS Uios are self-goverig orgaizatios that ca be classified ito three types: craft uios, idustrial uios, ad public-employee uios. Elected uio leaders ofte work full time i

19 their positios. Uios ofte employ their ow lawyers, doctors, ecoomists, educators, ad public relatios officials. Dues collected from members pay for the services of these professioals. Membership i a craft uio is limited to those who practice that craft or trade (for example, bricklayers, carpeters, or plasterers). Major craft uios exist i the buildig, pritig, ad maritime trades, ad for railroad employees. Members of idustrial uios are skilled, semiskilled, or uskilled employees i a particular place, idustry, or group of idustries. Examples iclude the AFL-CIO, Teamsters, ad Uited Auto Workers. Most of this coutry s basic idustries (steel, automobiles, rubber, glass, machiery, ad miig) are heavily uioized. Muicipal, couty, state, or federal employees such as firefighters, teachers, ad police officers may orgaize public-employee uios. These uios are orgaized much like craft ad idustrial uios except that they geerally do ot hire outside officers. Members serve as uio represetatives ad officers, sometimes with pay from uio dues. Photodisc/Getty Images What kids of workers could be members of a craft uio? PROFESSIONAL ORGANIZATIONS A professioal orgaizatio cosists of people i a particular occupatio that requires cosiderable traiig ad specialized skills. Professioal orgaizatios also collect dues from members ad provide support services. Notable professioal orgaizatios iclude the followig: America Bar Associatio (for lawyers) America Medical Associatio (for doctors) Natioal Educatio Associatio (for educators) I some cases, membership i a professioal orgaizatio is required. For example, the IMA (Istitute of Maagemet Accoutats) admiisters a atioal exam for the CMA (certified maagemet accoutat), but idividual state Boards of Accoutacy rather tha the AICPA (America Istitute of Certified Public Accoutats) admiister the CPA (certified public accoutat) exam. Both the IMA ad the AICPA provide most other fuctios of a professioal orgaizatio. Professioal orgaizatios provide the followig types of services for members: Establish ad maitai professioal stadards Admiister exams, accreditatios, ad admissio requiremets Publish professioal jourals to help keep members up to date Provide pesio, retiremet, ad isurace beefits for members Participate i political actio activities, such as lobbyig, which is a attempt to ifluece public officials to pass laws ad make decisios that beefit the professio Chapter 6 Pay, Beefits, ad Workig Coditios 129

20 ISSUES IN YOUR WORLD STARTING A SUMMER BUSINESS It s the America dream owig your ow busiess ad workig for yourself. As a studet i high school, you ca also share a part of that dream by startig a summer busiess. You ll gai valuable experiece, kow what it s like to work idepedetly, ad maybe eve pave the way for owig your ow compay i the future. If a summer busiess souds excitig to you, cosider these questios: Do you have a skill that you could offer to others, such as light housekeepig, mowig laws, or deliverig ewspapers? Ca you make ad/or sell a product that others would be iterested i buyig for example, flower platers, gift baskets, or crafts? To start a summer busiess, here are some steps to take. Get orgaized. Capture your busiess idea o paper. Write dow what you wish to accomplish ad how to fiace it. Talk with people who ca help you get started. These people may be parets, relatives, frieds, or others who ca assist you with ideas, fiacig, ad/or fidig potetial customers. Decide how to advertise your busiess ad fid customers. Will you go door to door? Place a ad i the paper? Sometimes you have to sped moey to make moey. Ca you save some moey betwee ow ad summer to give you that eeded cash? Start small ad build a solid customer base. Whe someoe places trust i you ad hires you to provide a product or service, do a great job. Your busiess will grow from word of mouth. Keep good records. Keep track of moey you sped, moey you ear, ad who owes you moey. Give good value to your customers. Provide a quality product or service ad take pride i your work. Keep a list of what wet well ad what wet wrog. You ca lear from your past experiece. THINK CRITICALLY 1. Have you ever wated to ow your ow small busiess? If so, what type of busiess would you like to have? 2. Do you kow people who ow their ow busiess? If so, ask how they got started. If ot, go ito a small busiess ad ask the ower to aswer those questios for you. What advice did you receive? 130 Uit 2 Moey Maagemet

21 6.2 Assessmet KEY TERMS REVIEW Match the terms with the defiitios. Some terms may ot be used. 1. A policy where the loger you work for a employer, the more job security ad rights you have 2. A schedule that allows employees to choose their workig hours withi limits 3. A attempt to ifluece public officials to pass laws ad make decisios that beefit a particular group 4. The process of egotiatig a work cotract for uio members 5. A job desig i which employees are traied to do more tha oe specialized task a. collective bargaiig b. compressed workweek c. flextime d. job rotatio e. job sharig f. labor uio g. lobbyig h. seiority 6. A work schedule that fits 40 hours of work ito less tha five days 7. A group of people who work i the same or similar occupatios, orgaized for the beefit of all employees i these occupatios CHECK YOUR UNDERSTANDING 8. Explai what is meat by a altered workweek. Give several examples. 9. Name several types of labor uios. What is the purpose of a labor uio? APPLY YOUR KNOWLEDGE 10. Iterview a perso who is workig full time ad belogs to a labor uio or a professioal orgaizatio. Ask what beefits members receive ad what it costs to participate. THINK CRITICALLY 11. Today s workers may be offered flexible work arragemets such as flextime, compressed workweek, job rotatio, job sharig, permaet part-time status, or telecommutig. Why do you thik employers offer these alteratives to their employees? 12. Compare ad cotrast flextime, a compressed workweek, job rotatio, ad job sharig. List the advatages ad disadvatages of each. At which stage i life would you wat to have oe or more of these optios? Chapter 6 Pay, Beefits, ad Workig Coditios 131

22 6 Chapter Assessmet SUMMARY Gross pay icludes your regular pay (wages or salary) plus overtime wages eared durig the pay period. Deductios (both required ad volutary) are subtracted from gross pay to determie et pay the moey you actually take home. Self-employed people pay both the employee ad employer portios of Social Security ad Medicare taxes. Beefits i additio to pay may iclude paid time off, employee services, child care, sick pay, leaves of absece, isurace plas, ad retiremet plas. Employees become vested i pesio plas ad employer-fuded savigs plas after they have worked a specified umber of years for the compay. Icetive pay offered to ecourage employees to strive for higher levels of performace may iclude profit sharig, bouses, ad stock optios. Cafeteria-style plas allow employees to choose the beefits that best meet their eeds. Flextime, a compressed workweek, job rotatio, job sharig, permaet part-time jobs, ad telecommutig offer employees flexibility. Labor uios icludig craft uios, idustrial uios, ad publicemployee uios use collective bargaiig to egotiate the terms of work cotracts with employers o behalf of their members. Negotiated work cotracts ofte provide for seiority rights. Professioal orgaizatios serve people i highly skilled occupatios. These orgaizatios maitai stadards ad keep members curret i their fields. Through lobbyig, professioal orgaizatios try to ifluece public officials to take political actio that beefits the professio. 132 Uit 2 Moey Maagemet

23 APPLY WHAT YOU KNOW 1. How much must a employer pay a hourly employee for hours worked beyod a regular workweek, assumig a regular rate of pay of $12 per hour ad 16 overtime hours? 2. Usig the payroll tax withholdig tables i Figures 6.3 ad 6.4, fid the state ad federal withholdig amouts for each of the followig cases: For a sigle perso, oe allowace, who made $109 last week For a sigle perso, o allowaces, who made $222 last week For a sigle perso, three allowaces, who made $291 last week 3. Compute the self-employmet taxes for a self-employed perso who made $40,000 this year. Separate the Social Security ad Medicare compoets. 4. Visit the Social Security Admiistratio olie at ad look up the curret-year Social Security chages. List the maximum taxable earigs for Social Security ad for Medicare, ad the curret tax rate o earigs. 5. Visit the America Medical Associatio olie at click o the About AMA lik, ad view its missio ad what it hopes to accomplish. Who is ecouraged to joi the associatio? How do members beefit? What are the AMA s primary goals? 6. Visit the America Bar Associatio olie at ad list or prit out the goals of the associatio. MAKE ACADEMIC CONNECTIONS 7. Research Visit the Natioal Educatio Associatio (NEA) olie at Click o a article at the home page ad read about a curret cocer or directio that is the focus of the NEA. Write a report that explais the purpose of its web site, the missio of the NEA, ad what services are available to members. 8. Iteratioal Studies Perform Iteret research o uios ad professioal orgaizatios i other coutries, icludig oe coutry i Europe ad oe coutry i aother cotiet. Fid out how workig coditios compare i coutries that do ad do ot have orgaized labor. 9. Math Prepare a employee withholdig sheet similar to the oe show i Figure 6.2, usig the followig iformatio: Mike Aderso, whose Social Security umber is , is paid weekly. He is sigle ad has oe withholdig allowace. He works i Orego (use Figures 6.3 ad 6.4 to determie his icome tax withholdigs). He worked 40 hours at his regular rate of $7.70 a hour, ad 6 overtime hours last week. I additio to required deductios, he had $22 for isurace, $12 for uio dues, ad $10 for charitable cotributios withheld from his paycheck. Chapter 6 Pay, Beefits, ad Workig Coditios 133

24 *Gajeder* D:/Temp_Dailyproductio/Rya_120640/z_productio/z_3B2_3D_files/rya_ _ch06.3d, 22/12/08/19:41:22, 19:41, page: 134 SOLVE PROBLEMS AND EXPLORE ISSUES 10. Tatum Gibb works for a weekly paycheck. She is sigle ad claims o allowaces. Last week she worked five days for a total of 44 hours. Her regular rate of pay is $8.40 a hour. I additio to withholdig for federal icome tax, state icome tax (use Figures 6.3 ad 6.4), Medicare, ad Social Security, Tatum also has isurace premiums of $16 a week withheld ad puts 6 percet of her gross pay ito a retiremet accout. Compute her gross pay, deductios, ad et pay. 11. Bret Coutryma receives a weekly paycheck. He is sigle ad claims oe allowace. Last week, he worked five days for a total of 48 hours. His regular rate of pay is $7.80 a hour. I additio to required deductios, he has $10 a week deducted for his credit uio accout ad gives $2 a week to a charity fud. Compute his gross pay, deductios, ad et pay. 12. Alia Delgado works for herself. She estimates that her gross icome this year will be $44,000, ad she will owe about $12,000 i federal taxes. How much should she pay whe she files each quarterly tax retur? How much Social Security tax ad Medicare tax will she owe for the year? What is the total amout of Alia s self-employmet tax? 13. Toe Chi works for a aual salary ad is paid every two weeks. His aual salary is $20,700. How much is his gross pay for each paycheck? 14. Adrea Ghai makes a aual salary of $31,200. However, she is paid mothly. How much is her gross pay for each paycheck? 15. May busiesses do ot wish to have labor uios at their compaies. While legally they caot forbid them, they offer wage rates that are equal to or higher tha uio wages, thus givig workers little reaso to wat a uio. The workers ejoy the same beefits as their uioized colleagues without havig to pay uio dues. Employees i such compaies are called freeloaders, because they beefit from uios but do ot help pay for them. Would you wat to joi a uio if you could avoid it (thus havig more take-home pay)? Why or why ot? EXTEND YOUR LEARNING 16. Ethics Lobbyig is ofte thought to be a legalized form of bribig public officials. Some groups, such as the America Medical Associatio ad the Natioal Educatio Associatio, do extesive lobbyig of legislators, at both the state ad federal levels. Some citizes feel this is a ufair use of political power. As idividuals, they caot afford to hire a lobbyist to represet them to gai ifluece. They argue that big uios ad professioal orgaizatios should t be able to do so either. Do you agree or disagree? What ethical issues are ivolved? For related activities ad liks, go to Uit 2 Moey Maagemet

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