Many people work for hourly wages. Some people work for an annual salary. Others have additional income from tips or commissions. Some people work for themselves, and the money they earn is called self-employment income. All these types of earned income are subject to income taxes and social security taxes. A tax is a required payment for the support of a government.
WAGES
Employees who work for wages are paid for each hour worked. Minimum wage is the lowest pay rate allowed by law for eachregular hour of work. The federal minimum wage is set by the U.S. Congress. In 2010, that rate was $7.25 per hour. Manystates have minimum wage laws that set a rate higher than the federal rate.
An 8-hour day and 40-hour workweek has become the standard in the American workplace. Hours worked in addition to the standard are called overtime hours. When employees must work overtime hours, they are entitled to extra pay called overtime pay. By law, overtime pay must be at least 1½ times the regular rate. For example, a worker who earns $8 per hour for regular pay would earn $12 per hour ($8 x 1½) for overtime pay. People who work on holidays may be entitled to even higher pay rates for their hours. Both federal and state laws control when extra pay is required for additional time worked.
SALARIES
Some people work for a set salary, such as $3,000 a month or $36,000 a year. Salaried workers usually do not keep time cards or count hours worked. They may have more fl exibility in the times they work than do hourly workers. They often work more than 40 hours a week but do not receive overtime pay. People who work for a salary are usually selfdirected. Managers and supervisors are typically paid a salary.
TIPS AND COMMISSIONS
Some workers receive tips in addition to wages. A tip is a gift of money, often a percentage of the total bill, to a person for performing a service. The amount of the tip may be based on the quality of service provided. For example, a waiter may receive tips in the form of money from customers. A caddy at a golf course might receive free tickets to a show as a tip. Some workers make most of their earnings from tips rather than hourly pay. Tips are subject to federal income taxes. Tips may be subject to state taxes as well. The law requires some employers (such as restaurants and hair salons) to withhold taxes based on tips, even though tips may have been received in cash directly from customers.
Some workers are paid a commission. A commission is a set fee or a percentage of a sale paid to an employee instead of or in addition to salary or wages. Sales commissions are earned only when a sale is made. If no sale is made, no commission is received. In some types of jobs, such as real estate sales, the worker’s entire earnings may be based on commission. For example, a real estate agent who sells a home for $200,000 might receive a $12,000 commission. In other types of jobs, workers may be paid a base salary plus commissions. For example, a person who sells cars might receive a salary of $10,500 a year plus 25 percent of the profi t on each car sold.
WAGES
Employees who work for wages are paid for each hour worked. Minimum wage is the lowest pay rate allowed by law for eachregular hour of work. The federal minimum wage is set by the U.S. Congress. In 2010, that rate was $7.25 per hour. Manystates have minimum wage laws that set a rate higher than the federal rate.
An 8-hour day and 40-hour workweek has become the standard in the American workplace. Hours worked in addition to the standard are called overtime hours. When employees must work overtime hours, they are entitled to extra pay called overtime pay. By law, overtime pay must be at least 1½ times the regular rate. For example, a worker who earns $8 per hour for regular pay would earn $12 per hour ($8 x 1½) for overtime pay. People who work on holidays may be entitled to even higher pay rates for their hours. Both federal and state laws control when extra pay is required for additional time worked.
SALARIES
Some people work for a set salary, such as $3,000 a month or $36,000 a year. Salaried workers usually do not keep time cards or count hours worked. They may have more fl exibility in the times they work than do hourly workers. They often work more than 40 hours a week but do not receive overtime pay. People who work for a salary are usually selfdirected. Managers and supervisors are typically paid a salary.
TIPS AND COMMISSIONS
Some workers receive tips in addition to wages. A tip is a gift of money, often a percentage of the total bill, to a person for performing a service. The amount of the tip may be based on the quality of service provided. For example, a waiter may receive tips in the form of money from customers. A caddy at a golf course might receive free tickets to a show as a tip. Some workers make most of their earnings from tips rather than hourly pay. Tips are subject to federal income taxes. Tips may be subject to state taxes as well. The law requires some employers (such as restaurants and hair salons) to withhold taxes based on tips, even though tips may have been received in cash directly from customers.
Some workers are paid a commission. A commission is a set fee or a percentage of a sale paid to an employee instead of or in addition to salary or wages. Sales commissions are earned only when a sale is made. If no sale is made, no commission is received. In some types of jobs, such as real estate sales, the worker’s entire earnings may be based on commission. For example, a real estate agent who sells a home for $200,000 might receive a $12,000 commission. In other types of jobs, workers may be paid a base salary plus commissions. For example, a person who sells cars might receive a salary of $10,500 a year plus 25 percent of the profi t on each car sold.
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