3-1: Employee Benefits and Earnings
Employee benefits are payments to employees for nonworking hours and to insurance and retirement programs. As a teacher, some of my benefits include partial payment for my family's health insurance, personal days, and sick days. Businesses provide benefits to employees to attract and keep workers or as a reward for continuous service. Providing benefits to employees is not required, however.
In this chapter, the benefits that will be provided for employees in MasterSport are vacation time, sick leave time, and personal leave time. What is unique about MasterSports system is that employees earn their right to vacation time, sick leave time, and personal leave time each pay period. On page 64 of your textbook, the following table is provided:
This is how to read this table. No employee is entitled to vacation, sick leave, or personal leave until they have worked 12 months (column 2). After the first year of service, the employee will be given 40 vacation hours, 0 sick leave hours, and 0 personal leave hours.
After the first year of service, the employee will begin earning more vacation time, sick leave, and personal leave time (column 3). For every biweekly pay period the employee works, the employee will earn 4 hours vacation, 2 hours sick leave, and 1 hour personal leave. Therefore, throughout the course of the next year, the employee is earning more and more vacation, sick leave, and personal leave time.
If the employee chooses to use any of his/her vacation, sick, or personal time, he/she must take time in the following increments: minimum of 4 hours vacation, minimum of 1 hour sick leave, minimum of 1 hour personal leave (column 4).
If the employee doesn't use his/her vacation, sick leave, or personal time, the time will accumulate or carry-over for the next year (column 5). However, employees may not accumulate or carry-over more than 120 hours vacation time, 80 hours sick leave time, or 24 hours personal leave time.
Keeping track of benefits can be complicated. For businesses that calculate benefits like MasterSports, there must be a systematic way to keep track of the benefits the employee has earned. That is what the Benefits Record is for--to keep track of employee benefit time.
A benefits record is started new each year. The record shows the amount of vacation, sick leave, and personal time used and earned throughout the year. If an employee wonders how much time is available for these benefits, the benefits record is the place to look.
For the Work Together problem, you will be creating a benefits record for Susan Fulton. The information about her (employee number, department, date of employment) is included in the problem instructions. You are given two weeks worth of information about her.
For the Work Together problem, some employees are paid hourly and other employees are paid a base salary plus commission.
To calculate hourly earnings:
One employee in the Work Together problem is paid a salary plus commission. A salaried employee earns a set amount of money, regardless of the time worked. Salaried employees usually are not required to report hours worked and are not paid overtime.
As an incentive to sell more product or to manage a department well, some salaried employees are paid salary plus commission. That means they get paid a set amount each pay period, but then at the end of the month, they are paid a percentage of the departments sales. A good example of a typical job that may pay salary plus commission is a car salesman. A car salesman will usually get a small salary paid each pay period, but will then earn a percentage of what he/she sells. This provides the salesman with an incentive to sell cars. If he/she sells more cars, he/she makes more money.
The top part of the commission record information is provided in the problem instructions. In that information, you will be given the base amount to be paid each pay period plus the percentage rate to calculate commission.
The bottom part of the commission record is for calculating the commission. Commission is based on the sales made per department. The employee will earn a percentage of department sales. To calculate commission, follow these steps:
In the situation above, the employee will be paid a salary plus commission. In other words, this employee will earn $1,200 in salary plus $236.53 in commission for total earnings of $1,436.53.
Special instructions for Applications 3-2 and 3-3: These two problems go together.
Calculate timecards like we did in Accounting I. Round time to the nearest quarter hour. List time worked in the hours worked column of the time card. Employees that are being paid benefits will be paid for time not worked. After you have calculated the time worked, go back to the time card and enter in the benefits being used from the benefits authorization form. Precede all benefits hours with a code that signifies the benefit: V=Vacation, S=Sick Time, P=Personal Time (see example below).