1. What Affects Income
b. How can you increase the money you bring home (continued)
Other compensation from your employer
To get a complete picture of your financial health at this point, let’s look at other forms of
compensation that you might get from your employer that don’t show up as money in a paycheck or as net pay. Called “employee benefits” these are certain things of value that you receive in addition to wages or salary.
Insurance
For example, your employer may have negotiated with a
health insurance company to insure all of the company’s employees for a specific per person rate. That rate will likely be lower than what you would pay if you had to purchase the
health insurance on your own because the employer has better buying power since he represents a large group. Usually, companies and their employees share the cost of
health insurance after the company has negotiated the rate.
Additionally, your employer may provide limited disability and
life insurance benefits at no cost to you. These benefits, sometimes purchased as part of the
health insurance benefit, are less expensive when purchased for a group than they would be if you purchase them individually for the same reason noted above.
The company or employer must also pay insurance companies for Worker’s
Compensation insurance in the event you are injured on the job.
Time off
Many employers allow their workers some paid time off in the form of holiday pay, vacation, or sick pay. The company pays for the time off but you aren’t there producing the work so it is an
expense for the employer and a benefit to you. Some employers include a meal for every shift you work or a uniform without cost to you. Bus passes or tickets to entertainment events are other examples of
compensation not on your paycheck.
Retirement account contributions
Some employers match your contributions to a retirement account (more on retirement accounts later.)
All of these expenses are paid for by the company in addition to your hourly wage or salary. Free coffee in the break room and “knocking off early on a Friday” while still being paid are all expenses for the company and
compensation for you.
The company or employer often uses the term “total compensation” because these costs may increase the bottom line expense to the company for each employee. If you had to pay for all of these benefits, you would have to earn more money, pay additional taxes on that income in many cases, and then pay many of these costs with after tax dollars out of your pocket. When you look at total compensation, be sure to consider all of the company provided benefits like matching contributions to a retirement account, reimbursement for education expenses, employee discounts, paid vacation and sick days, and the value of health insurance.
Payroll taxes withheld, employee benefits, employer costs and voluntary deductions
In the U.S. we pay income taxes on money as we earn it so these taxes are deducted with every paycheck. This money is withheld from your paycheck before you get it. The year to date (YTD) column shows how much has been deducted so far this year for that particular category. You might be able to reduce some of the payroll taxes you pay by making contributions to a retirement plan that your employer sponsors or by contributing to a health savings account – you can ask your employer about these options.
Hourly paycheck calculator
Use this calculator to help you determine your paycheck for hourly wages. First, enter your current payroll information and deductions. Then enter the hours you expect to work, and how much you are paid. You can enter regular, overtime and one additional hourly rate. This calculator has been updated to use the new withholding schedules included with the 2009 Stimulus Bill.
Definitions
- Pay period
- This is how often you are paid. Your selections are: Weekly (52 paychecks per year), Every other week (26 paychecks per year), Twice a month (24 paychecks per year), Monthly (12 paychecks per year), and Annually (one paycheck per year).
- Hours worked
- This is the number of hours you will be paid for working at your employer. Each of the "hours worked" entry fields has its own pay per hour. You can enter regular, overtime and other hours worked.
- Pay per hour
- This is your pay per hour from your employer. Each of the "pay per hour" entry fields has its own hours worked. You can enter regular, overtime and other pay per hour.
- Filing status
- This is your income tax filing status. The choices are "Single" and "Married".
Choose "Married" if you are married or file as "head of household". Choose "Single" if you file your taxes as a single person or if you are married but file separately.
- Number of allowances
- When your Federal income tax is calculated, you are allowed to claim allowances to reduce the amount of the Federal income tax withholding. In 2009, each allowance you claim is equal to $3,650 of income that you expect to have in deductions when you file your annual tax return. The number of allowances you should claim depends largely on the number of dependents you have and your itemized deductions. This calculator allows from 0 to 99 allowances.
- 401(k)/403(b) plan withholding
- This is the percent of your gross income you put into a taxable deferred retirement account such as a 401(k) or 403(b). While increasing your retirement account savings does lower your take home pay, it also lowers your Federal income tax withholdings. The impact on your paycheck might be less than you think. While your plan may not have a deferral percentage limit, this calculator limits deferrals to 80% to account for FICA (Social Security and Medicare) taxes. Please note that your 401(k) or 403(b) plan contributions may be limited to less than 80% of your income. Check with your plan administrator for details. For 2009, the maximum contribution to a 401(k) or 403(b) is $16,500 per year for individuals under 50 and $22,000 for individuals 50 or older.
- State and Local Taxes
- This is the percentage that will be deducted for state and local taxes. We take your gross pay, minus $3,650 per allowance, times this percentage to calculate your estimated state and local taxes. Please note, this calculator can only estimate your state and local withholdings.
- Post-tax deductions
- Enter any payroll deductions made by your employer that are made with after tax income.
- Post-tax reimbursements
- Enter any reimbursements made by your employer that are after tax.
- FICA OASDI
- FICA Old Age Survivors and Disability Insurance. FICA OASDI is calculated as your gross earnings times 6.2%. Please note that this calculator does not make any assumptions as to the total FICA OASDI paid for the current year. For 2009, incomes over $106,800 that have already had the maximum FICA OASDI amount of $6621.60 withheld will not have additional FICA OASDI withholdings.
- FICA Medicare
- FICA Medicare is calculated as the gross earnings times 1.45%. Unlike FICA OASDI there is no annual limit to FICA Medicare deductions.
- Federal tax withholding calculations
- Federal income tax withholdings were calculated by:
- Multiplying taxable gross wages by the number of pay periods per year to compute your annual wage.
- Subtracting the value of allowances allowed (for 2009, this is $3,650 multiplied by withholding allowances claimed).
- Determining your annual tax by using the tables below (single and married rates, respectively).
- Dividing the amount of tax by the number of pay periods per year to arrive at the amount of federal withholding tax to be deducted per pay period.
Single Withholding Rates*
Annual taxable income between these amounts |
Annual withholding |
Withhold additional % of income over this amount |
$0.00 |
$7,180.00 |
$0.00 |
|
|
$7,180.00 |
$10,400.00 |
$0.00 |
10% |
$7,180.00 |
$10,400.00 |
$36,200.00 |
$322.00 |
15% |
$10,400.00 |
$36,200.00 |
$66,530.00 |
$4,192.00 |
25% |
$36,200.00 |
$66,530.00 |
$173,600.00 |
$11,774.50.00 |
28% |
$66,530.00 |
$173,600.00 |
$375,000.00 |
$41,754.10 |
33% |
$173,600.00 |
$375,000.00 |
(no limit) |
$108,216.10 |
35% |
$375,000.00 |
|
Married Withholding Rates*
Annual taxable income between these amounts |
Annual withholding |
Withhold additional % of income over this amount |
$ 0.00 |
$15,750.00 |
$0.00 |
|
|
$15,750.00 |
$24,450.00 |
$0.00 |
10% |
$15,750.00 |
$24,450.00 |
$75,650.00 |
$870.00 |
15% |
$24,450.00 |
$75,650.00 |
$118,130.00 |
$8.550.00 |
25% |
$75,650.00 |
$118,130.00 |
$216,600.00 |
$19,170.00 |
28% |
$118,130.00 |
$216,600.00 |
$380,700.00 |
$46,741.60 |
33% |
$216,600.00 |
$380,700.00 |
(no limit) |
$100,894.60 |
35% |
$380,700.00 |
|
|