salary or hourly

[Rewire]

I was discussing owners comensation today and I was given something to think about. Most owners will take a salary and this is based on 40 hours so if an owner wants $25/hr x 40 they would take a salary of 1000.00 per week. But what usually happens is the owner logs 60 hours a week so that 1000.00 /60 comes out to 16.66/hr. So what happens is owners are grossly undervaluing their time. this skewes your numbers and effects your rate.
A salary was not meant to be a license to log as many hours as you can but as a tool to allow flexability in work hours. It was put forth to me that if I wanted to have true numbers and have my costs reflect what was actully being spent that it would be better to take an hourly wage. My goal is not to work 60 hours a week but to get back to 40 and eventually be an absentee owner. by actually paying myself for actual hours worked it will reflect a true cost so I can adjust what I charge based on true numbers. What I have been doing is donating reduced cost time .
So if you draw a set salary from your business this maty give you something to consider

 

[Gac66610]

Guess it's all on how you look at it.
I am on a salary, when I work 50+ hours a week I don't look at it as I'm only making this much, but, saving my company that much.
When times get tough the money I saved my company is now paying my salary.

Hope that makes sence, it only took me about 10 minutes to think I got it right

 

[cadpoint]

I'll assume these are toy numbers first off!

Why not consider yourself an employee, since you draw a salary of some sort.
You didn't even mention the other money's involved with having you as an employee?

The numbers your stating is missing sum of 28%. when in truth your probably floating at 35% tax bracket.

Yourself and now that your salary is a total cost not some side ratio, depending on how you feel.

Maybe I'm just missing where your trying to get your number from to input to a company's structure but in the end it doesn't matter and you will cover the debt and take the profits.

 

[Rewire]

Guess it's all on how you look at it.
I am on a salary, when I work 50+ hours a week I don't look at it as I'm only making this much, but, saving my company that much.
When times get tough the money I saved my company is now paying my salary.

Hope that makes sence, it only took me about 10 minutes to think I got it right

This was exactly how I was looking at it. I considered it "saving" my company money.What was pointed out to me was would I work 50 hours but only be paid for 40 if I worked for another company? I said no . Then I was asked why are you doing it for your company? I tried the circular argument "Im saving my company money" after I was again asked if I would do this elsewhere they added stop thinking like you are self employed and start thinking about it like a business.

 

[Rewire]

I'll assume these are toy numbers first off!

Why not consider yourself an employee, since you draw a salary of some sort.
You didn't even mention the other money's involved with having you as an employee?

The numbers your stating is missing sum of 28%. when in truth your probably floating at 35% tax bracket.

Yourself and now that your salary is a total cost not some side ratio, depending on how you feel.

Maybe I'm just missing where your trying to get your number from to input to a company's structure but in the end it doesn't matter and you will cover the debt and take the profits.

Part of the formula for determining your hourly rate includes owners compensation. If the owners compensation is skewed by "donated" hours then the hourly rate will not reflect a true cost .

 

[Gac66610]

This was exactly how I was looking at it. I considered it "saving" my company money.What was pointed out to me was would I work 50 hours but only be paid for 40 if I worked for another company? I said no . Then I was asked why are you doing it for your company? I tried the circular argument "Im saving my company money" after I was again asked if I would do this elsewhere they added stop thinking like you are self employed and start thinking about it like a business.

My responce to this question in red, would have been, "cause it's my company"
It may also be the fact that this a family business, all but one employee are family members, the one that isn't use to date my oldest daughter, thought they would marry, the only reason he stills works for me ... well good help is hard to find.

I'm sure there are better ways to run a business, this works for me. Food on the table, roof over our heads, couple bucks in the bank.
EDIT: I forgot one ... clothes on our backs to keep from scaring the kids

BTW 28% .... 35% tax bracket ... glad I have an accountant...you lost me :lol:

 

[cadpoint]

Part of the formula for determining your hourly rate includes owners compensation. If the owners compensation is skewed by "donated" hours then the hourly rate will not reflect a true cost .

Are you any better when it's time for

& I agree... I'll state that it's which hat your wearing when you look at it.

You can get to consider the lost of your time worth the $ or expence of "the Cash" or the time but in the end, it's all for the CompanY!

Gezz I'm starting to sound like you

There's plenty of ways to look at the numbers you have!

Draw a salary and Bill acordingly. Let this tweak of the business go, pay yourself and work your numbers into quarters. It frankly sounds like you'll run most of the numbers anywas, theres other numbers that can be studied and tweaked.

Frankly your profit margin should increase with you billing.

Better yet hire someone, Frankly sounds like it's time...

Myself, I've read here all the things that I've done wrong, Bill accordingly should be well be understood by now, but no... LOL




PS: I know U know your numbers, Come on Man

 

[Rewire]

My responce to this question in red, would have been, "cause it's my company"
It may also be the fact that this a family business, all but one employee are family members, the one that isn't use to date my oldest daughter, thought they would marry, the only reason he stills works for me ... well good help is hard to find.

I'm sure there are better ways to run a business, this works for me. Food on the table, roof over our heads, couple bucks in the bank.
EDIT: I forgot one ... clothes on our backs to keep from scaring the kids

BTW 28% .... 35% tax bracket ... glad I have an accountant...you lost me :lol:

Two farmers were talking and one said to the other how do you get any work done without any sons he smiled and said its not a problem I got daughters

 

[hurk27]

Be careful when you claim a salary but work out in the field hands on, the IRS can also make you pay and tax yourself for the hours over 40 in what most call Chinese overtime.

Let me give an example:

Lets say you claim a $500.00 a week salary, and you work 50 hours, that comes out to about $10.00 an hour, now if your hands on and not a office worker the labor laws require that the time over 40 hours to be paid at time and a half, so the ten hours over the 40 will be at $15.00 an hour.
It can trip you up in an audit if you ever get audited as it did one company I worked for which also had to pay us the extra money we didn't receive, which amounts to not much when you figure out what you make on the base salary versus the overtime which in the $500.00 a week salary comes out that you make $5.00 an hour for the over time.

basically it's a simple formula, take the base weekly salary divide it by the total hours, then use this amount to pay the time and a half on for the hours over 40.

While it doesn't come out to much the IRS wants its tax's on it and with fines and penalties can come back to bite you if they audit your payroll even if your paying yourself you have to claim this if you work in the field, I'll try to find it on the DOL web site.

Most small company owners who work out in the field just claim a 40 hour work week to avoid this little trap.

Here is a couple quotes from a DOL PDF Found here: http://www.dol.gov/whd/regs/compliance/whdfs23.pdf

Earnings may be determined on a piece-rate, salary, commission, or some other basis, but in all such cases the overtime pay due must be computed on the basis of the average hourly rate derived from such earnings. This is calculated by dividing the total pay for employment (except for the statutory exclusions noted above) in any workweek by the total number of hours actually worked.

Salary for Workweek Exceeding 40 Hours: A fixed salary for a regular workweek longer than 40 hours does not
discharge FLSA statutory obligations. For example, an employee may be hired to work a 45 hour workweek for
a weekly salary of $405. In this instance the regular rate is obtained by dividing the $405 straight-time salary by
45 hours, resulting in a regular rate of $9.00. The employee is then due additional overtime computed by
multiplying the 5 overtime hours by one-half the regular rate of pay ($4.50 x 5 = $22.50).

The only thing that exempts this is the job your doing does not require over time pay such as some sales or commision type jobs and some office type work, as well as some other types of jobs, which would also apply to hourly paid workers, so being salary paid is not a reason to not pay overtime and or the tax's on such overtime.

 

[Rewire]

Are you any better when it's time for

& I agree... I'll state that it's which hat your wearing when you look at it.

You can get to consider the lost of your time worth the $ or expence of "the Cash" or the time but in the end, it's all for the CompanY!

Gezz I'm starting to sound like you

There's plenty of ways to look at the numbers you have!

Draw a salary and Bill acordingly. Let this tweak of the business go, pay yourself and work your numbers into quarters. It frankly sounds like you'll run most of the numbers anywas, theres other numbers that can be studied and tweaked.

Frankly your profit margin should increase with you billing.

Better yet hire someone, Frankly sounds like it's time...

Myself, I've read here all the things that I've done wrong, Bill accordingly should be well be understood by now, but no... LOL




PS: I know U know your numbers, Come on Man

what was pointed out to me was if my goal was to get away from 60 hour weeks then I would have to delegate tasks to an employe or employees and if I was already factoring in those manhours into my hourly rate then I could hire without a need to adjust.
We just recieved our S-corp status and I am going to draw a paycheck with all the same burden as any other employee so I was looking at salary vs hourly for me.

 

[ptonsparky]

I draw a salary. Before that I took what was left after every one else was paid. Sometimes that did not work out well for groceries. Taxes or not, salary is better for me. It does scew the time involved on projects when I work on them depending if I keep track of my hours for that job.

 

[gadfly56]

Be careful when you claim a salary but work out in the field hands on, the IRS can also make you pay and tax yourself for the hours over 40 in what most call Chinese overtime.

Let me give an example:

Lets say you claim a $500.00 a week salary, and you work 50 hours, that comes out to about $10.00 an hour, now if your hands on and not a office worker the labor laws require that the time over 40 hours to be paid at time and a half, so the ten hours over the 40 will be at $15.00 an hour.
It can trip you up in an audit if you ever get audited as it did one company I worked for which also had to pay us the extra money we didn't receive, which amounts to not much when you figure out what you make on the base salary versus the overtime which in the $500.00 a week salary comes out that you make $5.00 an hour for the over time.

basically it's a simple formula, take the base weekly salary divide it by the total hours, then use this amount to pay the time and a half on for the hours over 40.

While it doesn't come out to much the IRS wants its tax's on it and with fines and penalties can come back to bite you if they audit your payroll even if your paying yourself you have to claim this if you work in the field, I'll try to find it on the DOL web site.

Most small company owners who work out in the field just claim a 40 hour work week to avoid this little trap.

Here is a couple quotes from a DOL PDF Found here: http://www.dol.gov/whd/regs/compliance/whdfs23.pdf





The only thing that exempts this is the job your doing does not require over time pay such as some sales or commision type jobs and some office type work, as well as some other types of jobs, which would also apply to hourly paid workers, so being salary paid is not a reason to not pay overtime and or the tax's on such overtime.

I'm not sure this is the way to look at it. When the employee is the owner, the wage rates don't generally apply. As mangement, the owner is an exempt employee and overtime does't apply no matter how many hours he/she works. The exception is Davis-Bacon or Prevailing Wage work.