Definitions
| Gross Pay | Net Pay | Commission | Bonus | Piecework | Standard Work Day/Week | Overtime |
Types
a) Hourly gross pay:b) Salaried gross pay:
- an hourly wage for each hour worked.
- are required to be paid, at the least, minimum wage. Hourly workers are entitled to overtime pay for hours worked over 40 hours per workweek.
- workers may be entitled to employee benefits including vacation, sick time, and health care.
- is determined by the hourly wage multiplied by the numbers of hours worked in a payroll period. For example, if the payroll period is a 32-hour week, the gross pay will be 32 times the hourly wage. The standard work week is considered 40 hours.
- a fixed amount of money or compensation paid to an employee by an employer in return for work performed.
- a flat salary regardless of how many hours worked during a work week.
- entitled to employee benefits including vacation, sick time, and health care.
- is determined by taking the annual pay and dividing by the number of pay periods in the year. For example if your annual salary was $48,000 and you were to be paid on a monthly basis you would receive $4000, on a semi-monthly basis - $2000, on a biweekly basis - $1846.15 and on a weekly basis - $923.07
Net pay (take home pay) is the remaining amount after deductions from the gross salary. The types of deductions that may be considered include: taxes (federal and provincial), union dues, Employment Insurance (EI), Canada Pension Plan (CPP), registered retirement savings plans. In each tax year there a maximum values set for CPP and EI. If the tax/CPP/EI tables do not allow for a particular amount there are formulas that can be used to calculuate the required value.
a) If the EI table does not contain the required value you must multiply the amount given by 1.73%
Example: 4076 x 1.73% = 4076 x .0173 = 70.5148 = 70.51 (rounding off after two decimals)
b) If the CPP table does not contain the required value you must divide 3500 by the number of pay periods. If weekly 52, biweekly 26, semi monthly 24, monthly 12. Subtract answer from gross pay and then multiply by 4.95 % or .0495
The following examples will focus on the basic deductions of federal and provincial income tax, CPP and EI. In each example the deductions will come from the tables that are provided.
1. Determine the deductions for a weekly salary of $1700 - Claim Code 1
- Federal Tax - $282.45
- Provincial Tax - $172.00
- CPP - $80.96
- EI - $29.41
- Total deductions for one week - $564.82
- Net Salary = $1135.18
2. Determine the deductions for a biweekly salary of $2100 - Claim Code 1
- Federal Tax - $270.70
- Provincial Tax - $172.00
- CPP - $97.31
- EI - $36.33
- Total deductions for one week - $576.34
- Net Pay = $1523.66
3. Determine the deductions for a monthly salary of $6,300 - Claim Code 1
- Federal Tax - $976.95
- Provincial Tax - $604.25
- CPP - $297.33
- EI - 6300 x 0.0173 =108.99
- Total deductions for one week - $1987.52
- Net Pay = $4312.48
4. Determine the deuctions of a semi-monthly salary if the yearly salary was $58,000. - Claim Code 1
- Semi-Monthly salary = 58,000/24 = 2416.67
- Federal Tax - $323.70
- Provincial Tax - $207.65
- CPP - $112.16
- EI - $41.81
- Total deductions for one week - $685.32
- Net Pay = $1731.35
A payment made to employees based on the value of sales achieved. An employee can have his or her salary based enitrely on commission sales or have a package that is made up of a base salary plus commission sales. Commission is, therefore, a form of “incentive pay”. Commission can be based on a set percentage or on a graduated percentage. The value of the percentage is based on how easy or difficult it is to sell a particluar a product (if easy the [percentage could be 5% or if difficult it could be as high a 35%). A graduated percentage is usually applied in sales that involve large quantities of money (for example home sales or commercial property sales).
Examples:
- Straight commission:
- A real estate agent earns 2.5% of the sales price of the home sold. How much does the agent make on a home that sells for $370,000?
- Sale price x percent = 370,000 x 2.5% = 370,000 x 0.025 = $9,250
- John work on a commission. He earns 4.25% on his gross sales. What would his salary be if he sold 600 lawn mowers at a value of $310.00 each?
- Gross sales = number of lawn mower x price per lawn mower = 600 x 310 =186,000
- Commission = Gross sales x percent = 186,000 x 4.25% = 186,000 x 0.0425 = $7,905
2. Base Salary plus commission
- Allison, a car salesperson, receives a base salary of $2500 per month and receives 2.25% of total sales. What is her monthly salary if she sells 6 cars worth a total $87,000.
- Commission = total sales x percent = 87,000 x 2.25% = 87,000 x 0.0225 = 1957.50
- Total monthly salary = base salary + commission = $2,500 + $1957.50 = $4,457.50
- Stewart works on a base salary plus commision bases. His base salary is $500 per week and he receives a commission of 4% on gross sales of all appliances he sells in his work week which starts on Tuesday and finishes on Saturday. What is Stewart's gross pay for a week is his sales of appliances totals $4,700?
- Commission = total sales x percent = 4,700 x 4% = 4,700 x 0.04 = 188
- Total weekly salary = base salary + commission = $500 + $188 = $688
3. Graduated Commission (example uses the same info but examines in decreasing amounts what happens when each level on commission is reached or not reached).
- Ted works in commerical real estate and his salary is based on a graduated commission bases. He will receive a commission of 6% on sales up to and including the first $10,000, a commission of 4 % on sales on the next $20,000 and a commission of 1.5% on all sales over 30,000. What is his commission on sales of $90,000?
- Since the gross sales is equal to 90,000, we can determine three different blocks of money
- a block of 10,000 at 6%
- a block of 20,000 at 4%
- a block of 60,000 at 1.5% (Total - 30,000 {sum of first two blocks})
- the sum of the three blocks equals total sales
- Commission on 1st $10,000 = Amount x percent = 10,000 x 6% = 10,000 x 0.06 = 600
- Commission on next $20,000 = Amount x percent = 20,000 x 4% = 20,000 x 0.04 = 800
- Commission on sales on remaining 60,000 = amount x percent = 60,000 x 1.5% = 60,000 x 0.015 = 90
- Total Commission = Amount on 1st 10,0000 + Amount on next 20,000 + amount on sales over 30,000 = 600 + 800 + 90 = $1490.00
- Ted works in commerical real estate and his salary is based on a graduated commission bases. He will receive a commission of 6% on sales up to and including the first $10,000, a commission of 4 % on sales on the next $20,000 and a commission of 1.5% on all sales over 30,000. What is his commission on sales of $22,000?
- Since the gross sales is equal to 22, 000 we can only determine two blocks of money
- a block of 10,000 at 6%
- a blocks of 12,000 at 4% (Total - 10,000 {value fo the first block})
- Commission on 1st $10,000 = Amount x percent = 10,000 x 6% = 10,000 x 0.06 = 600
- Commission on next $12,000 = Amount x percent = 12,000 x 4% = 12,000 x 0.04 = 480
- Total commission = Amount on 1st 10,000 + amount on sales over 10,000 but under 30,000 = 600 + 480 = $1080.00
- Ted works in commerical real estate and his salary is based on a graduated commission bases. He will receive a commission of 6% on sales up to and including the first $10,000, a commission of 4 % on sales on the next $20,000 and a commission of 1.5% on all sales over 30,000. What is his commission on sales of $8,000?
- Since the gross sales is equal to 8,000 we can only determine one block of money
- a block of 8000 (did not earn enough to move beyond first block)
- Commissison on 8,000 = 8000 x percent = 8,000 x 6% = 8,000 x 0.06 = 480
- Total Commission = Amount on 1st block or portion thereof = $480.00
Compensation over and above the amount of pay specified as a base salary or hourly rate of pay. Is considered part of gross pay for determination of income tax and other deductions. Bonus pay may used by organizations as a thank you to employees or a team that achieves significant goals. Bonus pay may also used to improve employee morale, motivation, and productivity.
A system of labor in which payment is based on the actual number of pieces produced rather than hours worked, regardless of how long it takes.
Standard Work Day or Work Week
By definition eight hours in a day and 40 hours in a week except in the case of averaging. Averaging is defined as work in an establishment that necessitates irregular hours due to seasonal or other factors, resulting in employees having no regularly scheduled hours or having regularly scheduled hours which vary from time to time. The employer may average the working hours of employees over a selected period of 2 or more weeks.
Overtime is defined as the hours worked in excess of the standard hours specified in the Code or Regulations, in most cases 8 in a day or 40 in a week. A minimum of one and one-half times the regular rate of wages defines overtime pay.
Examples:
1. John works 10 hours doing a concrete pour at a housing construction site. His hourly wage is $14.25. What is his gross salary for the day?
- Regular pay = number of hours x wage per hour = 8 x 14.25 = 114
- Overtime rate = Wage x 1.5 = 14.25 x 1.5 = 21.38
- Overtime = number of hours x wage per hour = 2 x 21.38 = 42.76
- Gross salary = regular pay for 8 hours + overtime for two hours = 114 + 42.76 = $156.76
2. Susan work at a retail clothing store and because of the need to do an inventory her total number of hours of work for the week total 45 hours. Her weekly salary of $720.00. What is her gross salary for the week?
- Hourly rate = weekly salary divided by number of hurs (40) = 720 /40 = 18.00
- Overtime rate = Wage x 1.5 = 18 x 1.5 = 27.00
- Overtime = number of hours x wage per hou r = 5 x 18.00 = 90.00
- Gross salary = regular weekly pay + overtime for five hours = 720.00 + 90.00 = $810.00