11 min
Construction Company Employee Compensation And A Note On Taxes Contractor Success Map with Randal DeHart | Contractor Bookkeeping And Accounting Services
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This Podcast Is Episode Number 489, And It's About Construction Company Employee Compensation And A Note On Taxes There are a few different methods that employers use to pay their employees, and while they may have similarities, they each also have implications for your construction business and employees. On top of that, there may be a blended model at play, in which you offer two types of compensation at once, such as a wage and bonuses.
When paying employees, laws and the IRS have made the payroll function a time-consuming nightmare for the small business owner.
Small business owners spend an average of eight hours monthly performing payroll functions. That's 12 full business days a year that could be spent generating sales, prospecting for new business opportunities, improving products or services, or servicing customers.
How you pay your construction employees will impact your finances and your reporting requirements. Read on to learn the differences between the main ways of earning money in the workplace.
Wages
Most entry-level positions offer an hourly wage in exchange for work. An hourly wage might be $20. So if the employee works 8 hours that day, they would be compensated $160 for that day.
The minimums set by law vary depending on where the business operates. Typically, the minimum wage is directly related to the cost of living in that area.
Generally, a set number of hours can be worked in a week, and working beyond that maximum entitles the employee to a higher pay rate. There may be premiums associated with working undesirable shifts or an even higher pay rate that employees are entitled to for working on holidays.
Because of the number of hours worked, the specific days worked, and overtime, the amount an employee will potentially earn each year can vary widely when paid with hourly wages.
Salary
A salary is the standard compensation for management and upper-level positions. It is an agreed-upon annual total, where a certain number of hours worked per week is expected – typically 35 to 40. Other requirements will be outlined, such as how many days per week are expected.
Depending on the schedule, the total salary is divided into equal payments for each pay period. Often, compensation is agreed to as an annual figure, with each paycheck equally divided by the number of payments. If you pay an employee a salary of $60,000 yearly once a month over 12 months, you will pay $5,000 each, not accounting for any deductions.
How a company manages its payment schedule will vary from company to company.
Other pay, such as overtime, commissions, or bonuses, are separate from salary. Many companies don't offer overtime pay for extra hours worked, but they may offer commissions or bonuses for performance.
Commission
This is a form of compensation that is based on performance. The amount an employee receives can vary drastically, depending on how well they perform in a pay period.
The commission is typically a calculated percentage of goods or services sold. It is meant as an incentive to drive employees to make sales. For example, you may offer to pay $100 as a commission for each deal closed. An employee selling ten service subscriptions in the pay period would receive a $1,000 commission.
All earnings made by commission are counted as taxable income.
Some salaried or hourly positions offer a commission on top of regular earnings. However, some positions, especially those in sales, can be based solely upon commission. This means that employees don't get paid if they don't sell anything.
Bonuses
A bonus is a compensation type that is not guaranteed. It is usually tied to some company goal, driven by sales or performance. A bonus might be awarded individually or to a team or other work group.
The idea behind a bonus is to create an incentive to meet a specific goal. It is rewarded when the goal has been reached or evaluated at particular times. Bonuses are offered on top of a wage
This Podcast Is Episode Number 489, And It's About Construction Company Employee Compensation And A Note On Taxes There are a few different methods that employers use to pay their employees, and while they may have similarities, they each also have implications for your construction business and employees. On top of that, there may be a blended model at play, in which you offer two types of compensation at once, such as a wage and bonuses.
When paying employees, laws and the IRS have made the payroll function a time-consuming nightmare for the small business owner.
Small business owners spend an average of eight hours monthly performing payroll functions. That's 12 full business days a year that could be spent generating sales, prospecting for new business opportunities, improving products or services, or servicing customers.
How you pay your construction employees will impact your finances and your reporting requirements. Read on to learn the differences between the main ways of earning money in the workplace.
Wages
Most entry-level positions offer an hourly wage in exchange for work. An hourly wage might be $20. So if the employee works 8 hours that day, they would be compensated $160 for that day.
The minimums set by law vary depending on where the business operates. Typically, the minimum wage is directly related to the cost of living in that area.
Generally, a set number of hours can be worked in a week, and working beyond that maximum entitles the employee to a higher pay rate. There may be premiums associated with working undesirable shifts or an even higher pay rate that employees are entitled to for working on holidays.
Because of the number of hours worked, the specific days worked, and overtime, the amount an employee will potentially earn each year can vary widely when paid with hourly wages.
Salary
A salary is the standard compensation for management and upper-level positions. It is an agreed-upon annual total, where a certain number of hours worked per week is expected – typically 35 to 40. Other requirements will be outlined, such as how many days per week are expected.
Depending on the schedule, the total salary is divided into equal payments for each pay period. Often, compensation is agreed to as an annual figure, with each paycheck equally divided by the number of payments. If you pay an employee a salary of $60,000 yearly once a month over 12 months, you will pay $5,000 each, not accounting for any deductions.
How a company manages its payment schedule will vary from company to company.
Other pay, such as overtime, commissions, or bonuses, are separate from salary. Many companies don't offer overtime pay for extra hours worked, but they may offer commissions or bonuses for performance.
Commission
This is a form of compensation that is based on performance. The amount an employee receives can vary drastically, depending on how well they perform in a pay period.
The commission is typically a calculated percentage of goods or services sold. It is meant as an incentive to drive employees to make sales. For example, you may offer to pay $100 as a commission for each deal closed. An employee selling ten service subscriptions in the pay period would receive a $1,000 commission.
All earnings made by commission are counted as taxable income.
Some salaried or hourly positions offer a commission on top of regular earnings. However, some positions, especially those in sales, can be based solely upon commission. This means that employees don't get paid if they don't sell anything.
Bonuses
A bonus is a compensation type that is not guaranteed. It is usually tied to some company goal, driven by sales or performance. A bonus might be awarded individually or to a team or other work group.
The idea behind a bonus is to create an incentive to meet a specific goal. It is rewarded when the goal has been reached or evaluated at particular times. Bonuses are offered on top of a wage
11 min