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 this simple relationship.
Social Security Taxes
Social Security taxes are the portion withheld from each paycheck at the rate of 6.2% and matched by the employer. It is reported on Form 941 each quarter to the IRS.
One of the most fascinating business models is the hair salon industry. Many salons are poorly managed and rarely generate adequate profits. To make matters worse, the stylists are like professional sports players. One week they are playing for this team, and next week they are on a new team. In effect, they switch salons. It often happens because of personality conflicts, but the most common reason is that the grass is greener over at the other salon. That is; there is more compensation over at the other salon. How can this exist? How can one salon offer greater compensation than your salon? After all, they face the same economic barriers you deal with on a day to day basis. Given this, what is a fair compensation package? How do you create a model that not only entices better stylists but ensures adequate profit for your salon? This article is written to describe the current industry model, and then I’ll explain what is wrong with the model and finally how to change the model to create a fair compensation package for the stylist and still generate adequate profits for your salon.
Form 941 is the employer’s quarterly federal tax return. It reports how much federal income taxes were withheld; Social Security taxes and Medicare taxes that are due and how much was paid in deposits to the Internal Revenue Service. The report is filed every three months for each of the four calendar quarters.