Different Forms of Compensation

There are two forms of compensation provided to employees; direct and indirect. Direct forms of compensation have a multitude of types or methods, from salaries to bonuses. Indirect compensation is primarily the various types of benefits and long term incentives. This article is an introduction to the terminology of compensation.

Direct Form of Compensation – Four Different Types

There are four different types of direct compensation for employees.  These include: 1) Hourly Compensation, 2) Salaries, 3) Commissions and 4) Bonuses.  There is some misinformation related to direct compensation as this subject relates to owners of a small business.  Items such as distributions or dividends or some assigned values on the K-1 are generally...

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Payroll – Introduction to Basic Concepts

Payroll

Payroll is envisioned as the simple employer employee agreement related to compensation for services.  I often think of this as the simple handshake whereby the employer agrees to pay the employee a set rate per hour of work.  This was true a hundred or more years ago, but over time; history and governmental regulations complicated...

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Form W-4 – Employee’s Withholding Allowance Certificate

Form W-4 is a form filled out by an employee to certify to the employer the personal tax situation of the taxpayer.  It is used by employers via the human resources department to fulfill three primary tasks.  First, confirm the legal name and address of the employee.  Secondly, the form is used to set the federal...

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Simple Retirement Plan – Section 408(p)

There are several different retirement plans available to the small business owner.  But no plan offers so many advantages to small business as the Simple retirement plan.  The positive attributes include: 1) Easiest to understand, 2) Least amount of paperwork, 3) No compliance reporting and 4) Plenty of flexibility.  If you are in business and...

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Worker’s Compensation Insurance – A Basic Understanding

Any business with employees should have worker’s compensation insurance, also referred to as workman’s compensation insurance.  Most states mandate this insurance if the employer reaches a certain number of employees (numerical and not full time equivalents).  The most common cited minimum count is three or more employees (eight states).  However, I strongly urge you to …

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Exempt and Non-Exempt Employees

The Federal Labor Standards Act of 1938 sets the standards as it relates to Exempt and Non-Exempt employees and their associated compensation and work standards.  The Labor Standards Act is located in Chapter 20 Section 201 of the Federal Code.  This Act is applicable to those small business operations with more than $500,000 of annual...

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Accrued Payroll – An Explanation

Accrued payroll is a current liability comprised of four sections.  The first is the amount of payroll earned by staff and not yet processed or paid.  The second is the dollar value of personal time off accumulated for each employee aggregated into one number.  The third consists of payroll taxes owed to the respective governmental …

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An Introduction to the Employee Manual (Handbook)

The employee manual is a guidebook and a tool to explain the policies and procedures for the small business operation.  It addresses the basic expectations for performance and conduct of the employee.  The manual is only a guide and the employee needs to understand its importance in the overall corporate policies and procedures hierarchy.  Furthermore,...

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