"I make US $ xxxxx". What does it mean exactly?

Factual Questions
21

[QUOTE=clairobscur]
How much lower? What exactly would have to be deduced from the gross income to figure out the net income (over here, so much things are deduced : healthcare insurance, unemployment insurance, retirement payments, and whatnot that I doubt most people even know, let alone care about or mention their gross income. The income mentionned is normally the net income : before income tax, which is paid separately, but after all welfare expenses are deduced. Basically, it’s what people actually get at the end of each month, with which they still have to pay the income tax.).
[/QUOTE]

Federal income tax (% varies by bracket and # of withholdings)
FICA (Medicare and Social Security 7.65%)
State Income tax (if applicable)
City tax (if applicable)
Health insurance, disability, dental insurance, life insurance contribution (if applicable)
Pre-tax medical or dependent care savings account (if applicable)
Parking or other employer fees (if applicable)
Personal pre-tax retirement contribution (if applicable)
United Way or other charitable giving deduction (if applicable)

Property taxes (local, mostly for schools) get paid separately out of your net income.

For example, I get paid $48,667 annually, $4055 monthly
I take home $30,720 annually, $2560 monthly

But I contribute 10% of my gross salary to retirement. And health insurance and other benefits are at least $400 a month I believe.

22

[QUOTE=Giles]
There are too many variables.
[/QUOTE]
To illustrate on how unpredictable it can be, a couple years ago, I bought a house. Because our tax code allows us to deduct (or not count as taxable income) funds that are used to pay interest on home mortgages, the amount of Federal taxes I pay each month dropped by roughly $7,500 or so a year, even though my wages remained the same.

A married couple making $40,000 a year with a mortgage and two children will probably pay a couple hundred bucks in Federal income tax. A single person who rents and has no kids will probably pay something like $4,000, maybe $5,000 in Federal income tax. (This is not even to talk about the cost of health care, local taxes, Social Security taxes, etc.)

23

Many paychecks are broken into several common areas:

Gross Pay
Deductions before Taxes (these reduce taxable income, such as 401(k) deductions)
Taxes (including FICA, Medicare, etc.)
Deductions after Taxes
Net Pay

The one thing that is common to everyone, regardless of where they live, is Gross Pay. Two people earning the same gross pay may have widely different net pay, depending on health insurance, amount paid into 401(k), state and local taxes, other deductions such as group insurance, so on and so forth. Take home (net) is too variable to be a basis for any sort of comparison

24

[QUOTE=Martini Enfield]
Managers get paid monthly in the US???

They must get pretty sizeable paycheques to be able to adequately budget for that…

[/QUOTE]

Huh? I get paid monthly and I don’t see the problem (I’m not a manager). All of the big payments (rent, utilities, student loans, etc.) are due monthly. I get paid on the 15th, I pay everyone else off within the week, all I have to budget through the month is food, sundries & entertainment. How is this different in Australia? Do monthly people all get paid on the last day of the month or something?

JRB

25

I am suprised to hear that people are getting paid monthly. I have worked a range of jobs in the States from fast food to technical professional. Most of the jobs have been paid every other week with one being paid twice a month. As for bugeting by the time you are in a managerial position I would hope you have been working long enough that you are not living paycheck to paycheck.

As for the main question I agree with every body else it is gross yearly pay or your gross hourly rate. From the context and the number it is easy to tell the difference.

26

[QUOTE=gotpasswords]
(Gross pay vs net)
A rule of thumb, back of the napkin guesstimate is 40% comes out of a paycheck to go to taxes and whatnot like union dues or health insurance. Looks like the average tax this year was 31.6%
[/QUOTE]

Thanks. that’s helpful.

27

I would mean my hourly pay times 80, times 26. (we get paid every two weeks) I figured on an average check I take home about 79% of that. But then you also have to add bonuses, commission and other incentives that aren’t figured into that. That can easily affect the total by $10000 or more a year, so it’s just easier to state it as the base pay.

28

Typically when someone refers to salary in annual terms it would be gross pay. For your take home pay (what you get in your paycheck) would most likely be net.

As an accountant for a payroll group I will tell you that most places, even if they have a mix of hourly and salaried employees will generally be paid on the same pay schedule. This is a much easier and cheaper route. Your typical company usually adheres to either a bi-weekly or twice monthly, and this is generally viewed as a compromise between a monthly (best for the employer) and weekly (best for the employee) schedule.

Professional and Managerial jobs are typically salaried and exempt from overtime pay. This is what most people view when they think of “salaried”, though it is possible to be non-exempt and salaried. This is not uncommon for lower level white collar jobs. Labor and temporary positions are typically paid hourly. It is not possible to be paid hourly and be exempt from overtime. It’s more common to see a company with a large number of hourly employee’s to keep a weekly pay schedule, but this is by no means the rule.

It would be very difficult to judge a person’s take home pay just by their gross salary. Site’s like Paycheck City can give you a rough idea of how much tax will be withheld, but without knowing precisely how many deductions, you’d only be able to ballpark it. Zsofia makes a good point too, your take home pay may not represent your total compensation. Especially if you work for a company with a good retirement plan.

29

Monthly payment is the norm in Germany, too. I don’t think anybody gets paid weekly anymore, and I’ve never heard of anybody getting paid bi-weekly/twice-a-month.

30

[QUOTE=gigi]

For example, I get paid $48,667 annually, $4055 monthly
I take home $30,720 annually, $2560 monthly
[/quote]

Weird. I just checked because I had no clue what my gross income was, and it’s, in €, exactly the same as yours in $. My net income being almost exactly the same too.

You mention that you have to deduce retirement contribution and health insurance, which are already deduced from my gross salary, but on the other hand I still have to pay the income tax (though it’s significantly less than your 10% + 400 /month, it's still in the same ballpark). Given that a dollar is worth roughly the same than an euro, I assume that, though it's calculated very differently, I could, as a rough estimate, assume that an american gross or net income is more or less the same as a french one, and just replace the symbol by a € symbol. Or deduce 40% from a gross income, as mentionned in previous posts and divide it by 12 to get a monthly net income which would be, roughly, the equivalent of what I’m accustomed to. The “net income= 60% of gross income” approximation seems roughly correct in your case too.

31

I started this message looking for the quote to paycheck city, but homeskillet beat me to it. I will also say that monthly is not the norm in America as competing interests from everyone I know is between bi-monthly vs. bi-weekly. Personally, I like the latter. My company can’t pay me fast enough. If I could have it my way, I would be paid hourly, as in, some dude drops by every hour with a chunk o’cash to my office (I’ll also accept direct deposit).

32

[QUOTE=JR Brown]
How is this different in Australia? Do monthly people all get paid on the last day of the month or something?

JRB
[/QUOTE]

I don’t know about Australia, but in France, people are indeed paid at the end of the month (often some days before it). “Difficult month’s ends” are often mentionned, and shops generally sell a lot less towards the end of each month.

However, except I assume for the first month during which you’re working, it doesn’t change a thing. If you get a monthly income it doesn’t really matter whether you get it at the beginning, middle or end of the month.

33

[QUOTE=JR Brown]
Huh? I get paid monthly and I don’t see the problem (I’m not a manager). All of the big payments (rent, utilities, student loans, etc.) are due monthly. I get paid on the 15th, I pay everyone else off within the week, all I have to budget through the month is food, sundries & entertainment. How is this different in Australia? Do monthly people all get paid on the last day of the month or something?
[/QUOTE]

Rents are generally due weekly or fortnightly (it does vary, but certainly every property for rent I’ve seen advertised has the rent as weekly), and while most other bills are due monthly, the power bill is quarterly (ie, 3-monthly) and there’s no real way to effectively and accurately budget for it- it can vary from month to month depending on the tariff, how much power you used, and so on. Certainly, our power bill is never consistent, but other people’s results may vary

Although it would certainly be possible to pay all your bills in one hit and just budget for food, sundries, and entertainment, the reality is that a lot of people (myself included) just aren’t making that sort of money- we’re not living paycheque to paycheque, but if the car needs new tyres or an unexpected expense pops up, we’re not earning enough to suddenly pull the money out of thin air, especially if you got paid monthly. You’d discover, for example, that your car needed new tyres AND the microwave suddenly stopped working… and since you don’t have enough money left over to pay for both of these things, you’re without a microwave until next month.

The other thing is that all the bills are due at different times of the month- in short, trying to budget for it all is a major nightmare. Most people I know have trouble with fortnightly pay, and the only people I’m aware of who get paid monthly are tradespeople, who are often getting large paycheques and find it easier to budget accordingly.

Your results may vary, however…

34

[QUOTE=homeskillet]
It would be very difficult to judge a person’s take home pay just by their gross salary. Site’s like Paycheck City can give you a rough idea of how much tax will be withheld, but without knowing precisely how many deductions, you’d only be able to ballpark it. .
[/QUOTE]

But that would be sufficient for me. I just want to have a rough grasp of what kind of income people are talking about when they mention it on this board. Until now I mostly had no clue.

35

[QUOTE=clairobscur]
However, except I assume for the first month during which you’re working, it doesn’t change a thing. If you get a monthly income it doesn’t really matter whether you get it at the beginning, middle or end of the month.
[/QUOTE]
When I was hourly (non-exempt) I got paid biweekly and divided up the bills accordingly. When I got switched to salary (exempt) it went to monthly and it was an issue as my credit card was due around the first of the month. With the lag of sending a check it would have been a hassle to pay in time. No problem, though; the cc company didn’t have a problem with changing the due date to ~the 10th.

I do live pretty much paycheck to paycheck right now, even on salary, as I am paying off stupid past debt.

36

[QUOTE=clairobscur]
But that would be sufficient for me. I just want to have a rough grasp of what kind of income people are talking about when they mention it on this board. Until now I mostly had no clue.
[/QUOTE]
And of course it becomes more meaningful when you know the cost of living in someone’s area; of course they can vary so widely throughout the US and I’m sure in France too. I only pay $500 in rent, with no dependents, so I should be rolling in it. :wink:

37

[QUOTE=chaoticbear]
Weird. I have held a million crappy jobs, and got paid biweekly every time.
[/QUOTE]

Same here. I’ve never had a job that paid weekly, even when I was working lousy foodservice and retail jobs as a teenager.

38

[QUOTE=gigi]
When I was hourly (non-exempt) I got paid biweekly and divided up the bills accordingly. When I got switched to salary (exempt) it went to monthly and it was an issue as my credit card was due around the first of the month. With the lag of sending a check it would have been a hassle to pay in time. No problem, though; the cc company didn’t have a problem with changing the due date to ~the 10th.

I do live pretty much paycheck to paycheck right now, even on salary, as I am paying off stupid past debt.
[/QUOTE]

I understand but anyway, except for the first month, being paid at the end of each month or at the beginning of each month is essentially the same. If suddenly I was paid at the beginning of the month, it would result, sort of, in an unexpected paycheck once, but after that, it would be back to normal.

39

On take-home pay and benefits:
If an American tells you he makes a given amount of money per year and the amount is above $25,000 per year, assume he gets to take home around 7/10ths of that.
If he’s substantially below $25,000 per year, he may get to take home as much as 9/10ths of his salary, but you should remember that a lot of folks at that end of the scale don’t get much in the way of benefits, with some exceptions.
If an American is above $50,000 or so and employed by a company of any size, he probably has the option of paying for benefits in the way of retirement savings and insurance against medical and accident expenses, although exceptions exist.
On pay schedules:
In my experience weekly pay is common for hourly employees although they are sometimes paid every other week. In one state government job I had 7 years back, I was hourly and paid monthly. I have the general feeling that there is a move away from monthly pay.
Note that some places pay twice per month, while sometimes they once every two weeks: in the first case you get 24 pays, in the second you get 26 pays. The former is easier to budget.

For a REALLY detailed estimate of pre-benefit wages, use this:

40

So how does getting paid multiple times a week work? That must be hell for the Payroll department…