There is no denial to the fact that the government rules and regulations keep on changing. Every once in a while, there are some iterations, introduction of some new law and what not. This is why an employer needs to be very vigilant and keep a constant tab on the laws and policies related to employee compensation or whatever affects your business in general.
Besides, you also need to decide which kind of wage or salary should be paid when. Even though a lot depends on your business type, there are several kinds of wages & salaries you must know. Sure you use a payroll software but knowing the basics won’t hurt anyway. Take a look.
Broadly, there are two kinds of wages, regular wages and supplemental wages.
These wages are the wages that are fixed. For instance hourly wages. Let us see the various bifurcations that come under regular wages.
1. Salary Wages
The fixed amount that an employee gets in a year is the salary. If you want to know the employee’s wages per period, you should divide the annual salary by the number of pay periods. If you pay the employee monthly divide the amount by 12.
2. Hourly Wages
The hourly wages are for the employees whom you pay a fixed rate for working every hour. To calculate this, you should multiply the rate you pay them per hour by the hours they have worked for in a pay period. This changes their pay amount every pay period.
As the word suggests, these wages are the ones that are additional in nature. They are not paid on a regular basis and are also not fixed. Given below are some of such wages. Most of them are optional but some are mandatory too.
1. Overtime Wages
It is necessary to follow overtime laws if you have non-exempt employees. You are supposed to pay these employees overtime if they work for hours any more than 40 in a week. It is 1.5 of the regular employee salary.
2. Retroactive Pay
This pay is the one that has not been paid by you to the employee and belongs to the previous pay period. This situation can occur due to a number of reasons like a miscalculation, the unpaid overtime amount, etc.
Money that an employee earns when they make a sale or achieve some other goal. It can be fixed or percentage based. This amount is different from the salary. An employee who gets regular wages may not get a commission in a pay period but will get the salary even then. However, if you pay an employee just the commission and no regular wages, you are ought to give him at least the minimum wages.
4. Bonus pay
The money that an employee earns occasionally apart from the regular salary amount he gets is known as the Bonus pay. It can be given by the employer for exceptional performance or at the time of festivals etc.
There are many HR software in India to automate the payroll process. Infact, most of the payroll software already have these wages mentioned. Still, knowing several things just like these add up to your knowledge and helps you in making better investment decisions.