Question

In: Accounting

Briefly explain: There are two types of financial payments made to employees which are factored in...

Briefly explain: There are two types of financial payments made to employees which are factored in determining pay rates. What are they and what are they composed of? Explain some of the differences in the types of pay.

Solutions

Expert Solution

Pay rates computation is one of the important aspect of the income tax and it is calculated based on the financial payments that are made to the employees and play an important role in determing these rates.

The two types of financial payments made are:

a) Direct Financial payments- These are the payments that are made in the form of wages and salaries, incentives,comission and bonus. These payments are time based payments and are made as a direct benefit to the employees.as a part of their time and performance in the company.

b) Indirect Financial payments- These are payments which are done as part of additional benefit plan such as insurance for the employees, health checck ups for the employees etc.

The difference are:

a) The direct payments are mainly time based pay and are paid on recurring basis where as the indirect pays are one time benefits to employees

b) Direct payments are mainly made as cash payout whereas the same is not true for indirect financila payments.


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