ADMS 1000 Chapter Notes - Chapter 5: Independent Contractor, Invisible Hand, Collective Bargaining

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grayprairie-dog588

18 Dec 2014

School

York University

Department

Administrative Studies

Course

ADMS 1000

Professor

Len Karakowsky

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ADMS 1000 Full Course Notes

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Four perspective have shaped debates about governance of work in canada: neoclassical perspective relies on the invisible hand of the market . Neoclassicalists assume that labour markets are perfectly competitive, or close to it, and therefore that if left undisturbed by government intervention and unions, will produce the optimal market outcomes. ) therefore, higher minimum wages decrease employment: managerial perspectives closely related to human resource management. 3. a belief with the neoclassical perspective that government intervention in the governance of work an employment should be minimal. Managerialists put their faith in enlightened management practices. Industrial pluralist perspective emphasize the imbalance of power between workers and employers and the value to society and economies of striking a balance between the efficiency of concerns of employers and the equity concerns of workers. Pluralists support activist government that intervenes in the work relationship in order to promote decent working conditions and worker voice in the determination of those conditions.

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Based on following text in your own words, list anddefine the four categories of employment income,providing an example (other than regular pay) foreach category.

Employment Income

An individual working for an employer receives compensation orpay, known as remuneration, for the services they perform. Where anemployee-employer relationship exists, remuneration is referred toas employment income. Employment income can be categorized intoearnings, allowances, benefits and taxable expensereimbursements.

Earnings

Earnings are dollar amounts the employer pays an employee forthe work they perform. Earnings can be paid as:
Â· a salary
Â· a rate for each hour worked
Â· a rate per piece of goods produced or picked
Â· a disability payment for time off work due to illness
Â· a payment for vacation time
Â· a premium payment for overtime hours worked
Â· a premium payment for hours worked on shift

Deciding which types of earnings are paid and how they arecalculated is primarily a decision made by the employer. Earningsare pensionable, insurable and taxable, and therefore subject toall statutory deductions.

Allowances

Allowances are additional dollar amounts paid to employees forthe use, or anticipated use, of their personal property forbusiness purposes. Allowances can also be provided to employees tocover the cost of personal living expenses associated withemployment. The most common types of allowances cover the costsincurred by the employee for car, meals, uniforms, safety shoes orother particular types of clothing for business reasons. Undercertain conditions, allowances are not considered employment incomeand therefore are not subject to statutory withholdings.

Benefits

Benefits are dollar values attributed to something the employerhas either provided to an employee or paid for on an employeeâsbehalf. Usually, when an employer provides an employee withsomething (for example, a company-leased automobile is given to theemployee for both business and personal use) or pays for somethingon an employeeâs behalf (for example, group term life insurancepremiums), it results in a benefit to the employee. There arecertain situations where benefits are not included in employmentincome and therefore are not subject to statutory withholdings.

Expense Reimbursements

Similar to allowances, expense reimbursements are also dollaramounts paid to employees to cover expenses that they incur whileperforming their job. For the most part, expense reimbursementsgenerally fall outside of payroll because they are business-relatedand therefore not employment income to employees. These expensesare claimed on an expense report, supported by receipts, andusually submitted directly to the accounting department forreimbursement. As such, they are not considered in the calculationof an employeeâs pay. Some organizations choose to reimburseexpenses through payroll in which case they are not subject to anystatutory deductions; they will, however, affect the net pay. Anyreimbursements made to an employee for personal living expenses areconsidered taxable to the employee, included in income and subjectto statutory withholdings.

You have recently been hired as the business manager of a dentaloffice. Your employers, the two dentists that own the practice, areconsidering a number of changes to their practice. Using theinformation youâve learned in this course and generally in yourdegree and the facts provided on the next page, please draft ananswer to each of the questions provided on the next page. Youranswer should be a minimum of three pages in length (though it maybe considerably longer) and should address each of the providedquestions. Please explain your work and any calculations that youcomplete as part of that work. Finally, for all questions butquestion 1, please make the following assumptions: 1. The federalincome tax rate is 39.6%. 2. The C-corporate income tax rate is35%. 3. The Self-Employment tax rate is 15.3%. 4. The SocialSecurity tax rate is 6.2% (employer) and 6.2% (employee). 5. TheMedicare tax rate is 1.45% (employer) and (1.45 (employee). 6. TheMedicare Surtax does apply. 7. The maximum Section 179 amount is$100,000 per year. 50% bonus depreciation is available. If you makeany other assumptions in your case analysis, please notate them andexplain your reasoning. â Currently, the business is organized as apartnership. Each of the dentists takes a $20,000 monthly draw fromthe business as a guaranteed payment. They have a staff dentist whois an employee of the practice who is paid $140,000 per year. Inthe current year, the businessâs profits after payment of theguaranteed payments are expected to be an additional $800,000,which is divided equally between the owners. Currently the businessreports its taxes on the cash basis. The business is located in arural renewal community; however, the business does not currentlycomplete any paperwork relating to the work opportunity tax credit.The business owners are grateful the small community in which theyhave made their business and regularly donate 20% of the businessâsnet profit to local religious and charitable organizations. Thebusiness owners would like to upgrade their X-Ray equipment toexpand the businessâs offerings. They are proposing to spend$400,000 on the new equipment and expect the equipment to generateincremental earnings of $80,000 a year for each of the next 8years. 1. Should the business purchase the new X-Ray equipment?What is the Net Present Value of the X-Ray investment assuming a12% cost of capital? How does depreciation impact the Net PresentValue?

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1. The federal income tax rate is 39.6%.

2. The C-corporate income tax rate is 35%.

3. The Self-Employment tax rate is 15.3%.

4. The Social Security tax rate is 6.2% (employer) and 6.2%(employee).

5. The Medicare tax rate is 1.45% (employer) and (1.45(employee).

6. The Medicare Surtax does apply.

7. The maximum Section 179 amount is $100,000 per year. 50%bonus depreciation is available.

If you make any other assumptions in your case analysis, pleasenotate them and explain your reasoning.

Currently, the business is organized as a partnership. Each ofthe dentists takes a $20,000 monthly draw from the business as aguaranteed payment. They have a staff dentist who is an employee ofthe practice who is paid $140,000 per year. In the current year,the businessâs profits after payment of the guaranteed payments areexpected to be an additional $800,000, which is divided equallybetween the owners.

Currently the business reports its taxes on the cash basis. Thebusiness is located in a rural renewal community; however, thebusiness does not currently complete any paperwork relating to thework opportunity tax credit. The business owners are grateful thesmall community in which they have made their business andregularly donate 20% of the businessâs net profit to localreligious and charitable organizations. The businessowners would like to upgrade their X-Ray equipment to expand thebusinessâs offerings. They are proposing to spend $400,000 on thenew equipment and expect the equipment to generate incrementalearnings of $80,000 a year for each of the next 8 years.

The owners are considering alternate organizationalstructures.What structure that we learned about will yield thelowest total tax burden for both the business and the owners?Howmuch will that tax burden be and what taxes will it comprise?Whatare the ownersâ and the businessâs marginal tax rates under yourrecommended structure?

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ADMS 1000 Chapter Notes - Chapter 5: Independent Contractor, Invisible Hand, Collective Bargaining

ADMS 1000 Full Course Notes

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