(Prolog: Much of this article asks about laws and practices in the United States, but readers from other nations are encouraged to report how things work in their part of the world. I would be curious to know.)
Every once in a while you’ll read about a corporate executive whose company employs him — or maybe “employs” him — for a salary of $1 per year. One example is Steve Wozniak, co-founder of Apple Computer, who does no work there anymore but remains on the payroll, largely for sentimental reasons. Another example is John Reed, the new chairman of the NYSE, who was just hired at $1/year, but who presumably will be fulfilling the real duties of the job.
Obviously, such people are already wealthy by other means and so they willingly forgo a “real” salary. But for whatever reason, the lunacy of this idea — being paid $1 a year — has recently gripped my mind, and has provoked some Seinfeldian questions that I can’t shake:
[li]Does the employee receive tiny paychecks or direct deposits? Say, a semi-monthly check of 4 cents?[/li]
[li]Are taxes (like FICA and Social Security in the U.S.) withdrawn from each paycheck? Aren’t there some rather severe rounding problems if so?[/li]
[li]Suppose you’re applying for a home mortgage and the bank requests copies of your last three paycheck stubs, as is commonly done around here. Won’t you look rather foolish, with your measly 4-cent checks? Or does everyone at the bank just have good laugh?[/li]
[li]Does your employer send you a W2 form each January, just as if you were a normal person?[/li]
(For non-Americans, a W2 form is a report from your employer giving total income earned over the previous year, along with tax deductions subtracted. The information is needed when filing your income tax forms in April.)
[li]If there is to be a token salary like this, why isn’t one cent a year just as good? Why not no money at all? Is there a law requiring American corporations to pay $1 as a minimum?[/li]
[li]I assume this tiny salary doesn’t violate the Minimum Wage Law because the employee is salaried, as opposed to wage-earning. Does U.S. law specifically classify employees in this way, even though the IRS doesn’t make the distinction when you report your income?[/li][/ol]
Thanks in advance to whomever has the patience to answer my juvenile questions.