Planning and recording income topic for Business Studies Junior Cycle

1. PLANNING AND
RECORDING
INCOME

2. Learning
intentions  Distinguish between gross and net
income
 Illustrate the difference between statutory
and voluntary deductions from income
 Prepare and evaluate a household
income plan

3. INCOME FOR
EMPLOYMENT
KeyTerms

4. Salary
A salary is a fixed annual payment made to an
employee as a reward for work.
It is usually paid in equal monthly instalments

5. Wage
A wage is a payment received for work done. It is
normally calculated on the basis of actual work
completed or on the amount of time spent working.
 Unlike a salary, which is a fixed regular payment, wages are more
likely to vary from one payment period to the next.
 Wages may be calculated using a number of different methods,
including:

6. Wage calculation based on the number of hours worked
 Time Rate
Example:
40-hour working week €15 per hour
Wage = 40 hours x €15 per hour = €600

7.  When an employee works for longer than the standard working week
(usually 39 hours) they may be entitled to receive a higher rate of
payment for those extra hours
 Overtime Payments
 Common overtime rates include:
 Time and a half
 Double time

8. Example:
 Mike is normally paid €10 an hour for a standard 39-hour working
week
 If he works more hours during the week, for those hours he is paid at
time and a half €15 for each extra hour (€10 x 1.5)
 If he works extra hours at the weekend he is paid at double time
and receives €20 per overtime hour (€10 x 2)

9.  This is a wage calculation based on the amount of work actually
completed.
 Piece Rate
Example:
 Mary receives €3 for each shirt made
 If Mary completes 200 shirts, she will earn a wage of €600
(200 x €3 = €600)

10.  Some employees receive a payment based on the value of the
goods or services they have sold.
 Commission
Example:
 An estate agent might ear 2% commission on each property sold
 If a house sold for €200,000 will earn the agent a commission payment
of €4,000
(€200,000 x 2% = €4,000)

11.  A bonus is an extra payment received for reaching an agreed
performance target or deadline. It may also be awarded for work of a
very high standard. It is a type of irregular income
 Bonus Payments
Example:
 A job has a completion date of 11
July and if this deadline is met the
employee will receive €100 bonus

12. Gross Pay is the employee’s income before anything is deducted from it
Gross Pay Vs Net Pay
Gross Pay = Basic Pay + Overtime + Bonuses
Net Pay describes workers income after all deductions are taken from it. Net pay
is also called ‘take home pay’.
Net Pay = Gross Pay – Deductions

13. Deductions
There are two main types of deductions from pay:
Statutory Deductions:
These are compulsory deductions
which every worker is legally
required to pay.
Examples include:
• Income Tax
• Pay Related Social Insurance
(PRSI)
• Universal Social Charge
(USC)
Voluntary Deductions:
These deductions are not
compulsory, but workers may
choose to pay them.
Examples include:
• Payments for private health
insurance or trade union
membership
• Savings

14. Disposable Income is the income which remains after all income taxes and
compulsory payments have been made.
Disposable Income
Since some of this money may be required for essential spending,
householders may not have an entirely free choice about how to spend
(or save) it.
Disposable income = Gross Income – Statutory Deductions

15. Discretionary Income
Discretionary Income refers to the amount of income left over after taxes
and essential spending has been paid.
 Food
 Clothing
 Shelter
 Childcare
 Payments for utilities (light, heat, water etc.)
Items of essential spending include

16. Discretionary Income
Householders have much greater freedom and choice when it comes to
spending discretionary income.
Discretionary Income = Gross Income – Statutory Deductions –
Essential Payments

17. INCOME
CALCULATION

18. Employees are given a payslip, either on paper or electronically, to show
how much they have earned and what deductions have been taken.

19. Planning and Recording Income
■ Households can use an Analysed Cash Book to keep records of
actual income received
■ These income records are useful for future planning purposes
as they enable the household to look at income patterns over a
period of time.
■ This helps ensure that estimates of future income are more
accurate and realistic.

20. MURPHY HOUSEHOLD INCOME PLAN
Planned Income January € February € March € Total €
Mr Murphy Salary 1,900 1,900 1,900 5,700
Mrs Murphy Salary 2,300 2,300 2,300 6,900
Child Benefit 405 405 405 1,215
Interest from Bank Account 40 40 40 120
Total Income 4,645 4,645 4,645 13,935