A little thinking exercise. Something I am sure might cause some interesting issue to come to the forefront. What is the difference between salaried, commissioned, and payroll? Has anyone in the modern market place even considered carefully this interesting little quirk of econo
Let's use U.S. as an example. There are about 52wks in year. Average work week is oh. 5 days. Supposed work hours per day is about 8 hrs. So=1yr is about of 52x5x8 man hours. If we don't factor in holidays. Etc. So an average person is capable of oh. 2,080 work hours right?
Now here is the nitty gritty. We have some questions to ask. How much money could a man make depending on his position and his pay scheme? Lets compare salary to paycheck payroll. This is going to be fun. We shall pit our humble Schmogans from Schmoganville to this.
Meet John and Jim Schmogan. Nice folks. It so happens that John and Jim work at the same company. However, they are treated very differently. John is a Salaried Schmogan, and Jim is a Payroll Schmogan. In Schmogansville they use the currency Flounders, because its tasty so?
John and Jim were hired at the same time at Silver Schmogan Shoe Company. John's salary is about 30,000 Flounders per year, while Jim's Payroll is oh 15 Flounders per hour. However, there is a catch. Remember the math? Hmm its time to crack Schmogans...I mean eggs and scramble!
There are two itsy bitsy fine print problems here with both John and Jim Schmogan. All the legalities in pay are in order it seems, we checked with all the lawyers in Schmoganville, it all checks out. But, I can't quite get the feeling something is off with the math a bit. 🤔
Remember 52wks x 5 work days x 8 hours = approximately 2,080 man [Schmogan] hours? Lets use Jim first since we can do some math at his Schmogan expense. 15 Flounders x 2,080. Should equal about 31,200 Flounders per year. Hmm, weird. So Jim is winning right? Or is he?
Lets look at John now we have to go backwards. (((30,000/52)/5)/8) I rounded up on decimal remainders. So John is doing 14.50 Flounders per hour approximate.
So out of the gate we have an odd descepancy between the Schmogans John and Jim. Ah but it gets more interesting.
So out of the gate we have an odd descepancy between the Schmogans John and Jim. Ah but it gets more interesting.
Remember John is "salaried" you see a salaried Schmogan is lucky, because his pay is for the most part rain or shine its always going to be on time. Jim on the other hand is at the mercy of at will work and pay. So Jim might be ahead on paper, but he is actually more vulnerable.
John is for the most part insulated baring massive internal accounting issues from the variables of the datasheet in Silver Schmogan Shoe Company. However, Jim is completely vulnerable to anything. It seems the economy is not doing well in Schmoganville, so the Shoe Company cuts
Jim Schmogan gets hit with a 1.50 out of 15 Flounder paycut. So Poor Jim is now down to 28,080 Flounders per year. OUCH. While John Schmogan is still getting his 14.5 Flounder per hour at a 30,000 Flounder salary at the end of the year. Oh I forgot salaried Schmogans get overtime
Lets, add another little wrinkle to the Schmogan saga. John is actually a salaried manager. So he starts earlier and ends later than his lower tiered Jim on payroll. So John technically is working 10 hours vs. Jims 8 hrs. Which can mean under certain circumstances John is lower🤔
But here is where some odd things come into play. Did I forget to mention Schmoganville is an income tax collecting town? Oh really you didn't? Well, John and Jim are going to find out when the tax man pinches their billfold come tax day. Here comes a Schmogan funny of accounting
Schmogan taxmen always do their tax collection by approximation. Not by actual assets on hand. So John and Jim both are being measured here for the tax mans prime steak cut. Ouch boys that looks painful. So Jim starts working overtime to make up his lost wages. But OUCH.
Remember overtime is weighed as time and a half depending on laws in Schmoganville. So if struggling Jim ends up working overtime for the year. Lets say an additional 2 hours for six months. I will round it to 20 Flounders an hour. He makes about 5200 Flounders, but wait. Watch🤔
Remember Mr. Taxman. He is looking at Jim's payroll and says hey Jim is making more money approximating Jim to be earning higher at 33,280 Flounders per year, due to his overtime! While John is still inside the 30,000 per year salary. So Jim gets hit with a higher tax bill! 🤔
Now poor Jim Schmogan is in a tight spot. Any accident, any removal of overtime opportunities, to keep salaried workers, any accident-injury-or sickness, cuts, layoffs, automation, puts him at high risk of become fiscally insolvent in a hurry! While John putters along in comfort.
Now there are some interesting little issues between John and Jim Schmogan. John as a salaried worker gets bonuses or raises more often, than Jim whose raises are miniscule and almost pennies to the Flounder. John can even make mistakes and still get paid, or not even work at all
John can take time off far more regularly than Jim, who is constantly back at the factory trying to keep food, clothing, and roof of his head. Oh I forgot this is not calculating costs for a Schmogan to get to work, to eat, or even to have things taken out for his benefits. But🤔
Schmoganville has a 10% income tax. Just to be fair you know. John pays 3,000 Flounders. While Jim is paying 3,300 Flounders. Now here is where the issue is more intriguing. Now John is working in a department to sell our wonderful Schmogan Shoes. He is salaried, so he does sales
John Schmogan is also competing with a certain Jane Schmogan for selling the products he wants that bonus. However there is a catch. John is salaried, there is safety net for doing good or bad. Jane however is commisioned. So in order to eat she must sell or die. Wonderful no? 🤔
John Schmogan pushes for the sale of a rather tacky Schmogan shoe that has in the past sold, and he also designs some shoes so outlandish no one buys them! Jane however, has to make a commision on her sales, and caters to her Schmogan market. She understands the needs of her zone
Jane is paid something akin to a minimum wage. Around 10.5 Flounders. John is still 30,000 Flounders per year, and about 14.5 per hour. Jane Schmogan has another issue, her contract stipulates she does a sale or she is fired. Barely enough to survive with back to fire no? 😱
However, there is another caveat as well. As long as Jane is making commission she actually loses the safety net of 10.5 Flounders. While John can putter around doing whatever he likes he is salaried. So Jane needs to make at least 30K Flounders in commissions just to be even
And lets say Jane is getting a 20% Commission in Flounders on everysale. But she has to make sales of over 150K Flounders to do that, or its the street. And this kind of pay is extremely at the whim of a customer and the market. So what makes sense to you? Pay,Sal, or Comish?
