Different Payrolls for Different Employees
Different Payrolls for Different Employees
Payroll is a part of a business that can cover a wide area of operations. Employees put in their hours, and payroll pays them their due. While that may be the basic principle of payroll, there are many complicated items that it must deal with. One being how to pay different types of employees. Not every employee is paid hourly wages. Even some who are have additional pay that must be taken into consideration.
What are these forms of employment and how do they affect payroll? More importantly, how do they affect you? The main ways that any form of employment affects a worker’s pay is on their regular paycheck and tax returns. The various forms of employment, and how they affect payroll are:
Salary: Salary pay is based on a fixed amount of income, paid over a course of time, which is not affected by the quality or quantity performed. This means someone is paid the same for working 20 hours a week or 30 hours a week. If someone is paid a $30,000 yearly salary, then it could be broken down into 12 parts. Each part paid to the employee once a month. It could be broken down into 24 parts, paid twice a month to an employee. Unless exempted, overtime has to be paid for salary. In some positions, such as executive or administrative, an employee can be exempt from overtime pay.
Salary has taxes taken out from it. Most times, the pay number given (ex. $30,000) is the amount before taxes are removed.
Hourly Wage: Hourly wage pay is based on a fix amount to be paid for each hour of work. The final amount placed on the paycheck is determined by how many hours are worked by the employee, minus taxes. Each state has a different minimum wage that must be paid to each employee, and a overtime limit. If an employee works overtime, they are typically paid time and a half for each hour over.
Waiter/Waitress Pay: The pay for a waiter or waitress is done the same as an hourly wage, but can be paid below the normal employee minimum wage. Every state has their own minimum wage for waiters and waitresses. The reason they can be paid less is because their pay is supplemented by tips. (Extra money given directly to the worker by customers or clients).
Besides the normal taxes taken out of a wage based paycheck, tips received are also subject to taxes. If a waiter or waitress receives more than $20.00 in tips in a calendar month, rather received directly from a customer, from a coworker under a tip sharing agreement, or from a credit or debit card, they will be taxed on the total amount.
Commission: Commission pay is pay received based on the number of items or services sold. Often times in the automotive dealership business, salesman are paid based on every vehicle they sell, and what additional items they sell with it, such as warranties and insurances. Commission pay is taxed similar to salary and hourly wage. Even though not paid hourly, unless meeting the requirements to be exempt, a business or company must compensate a commission based worker for overtime work.
Some companies will pay an employee an hourly or salary, with possible commission pay as well.
Subcontracted: Subcontracted pay can work the same as the above mentioned methods, but no taxes are taken from the subcontractors pay. The subcontractor may be treated as a part of the company, but is typically not a part of the company itself.
Because no taxes are taken from the subcontractor’s paycheck, come tax time the subcontractor or worker must pay the taxes out of pocket.
It is important for both the company and the employee to understand their employment and how it affects the payroll department. If done incorrectly, hefty fines and penalties can be brought against a company. For help in understanding these differences, consider outsourcing payroll and human resource departments to a company such as Vision H.R. They are trained in handling all forms of payroll matters and stay current on trends and regulations concerning payroll.
