Employees' pay

7 important questions on Employees' pay

What is the difference between a wage or a salary?

A wage is a rate per hour, a salary refers to an annual amount.

What is gross pay?

Gross pay is the amount of wages or salary before deductions are made.

What are the main methods of calculating gross pay?

- a fixed amount per period of time, usually a year
- piece rate: pay based on the number of units produced by the employee
- commission: a percentage based on the value of sales made by the employee
- basic hourly rate: a fixed rate multiplied by number of hours worked
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How are income tax deductions treated?

All the wages and salaries are liable to have income tax deducted from them. If the employee is found liable for income tax, the employer will deduct the tax due. Each person is allowed for allowances to be subtracted from their earnings when calculating how much they are liable to pay in income tax.When the allowances are bigger then their earnings, no income tax is deducted.

How is the taxable income calculated?

Gross pay
Less: reliefs
Pay which is taxable

What is the tax code?

The tax code will incorporate all the tax reliefs to which the employee is entitled.

What is the advantage of using a wages control account?

It makes it possible to monitor actual payments made for wages and salaries against what should have been paid.

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