Regular earnings: What is included and omitted?

Any payment received by an employee in return for his or her services is referred to as regular earning. The regular earnings include salary, temporary wages, part-time wages, etc. It also includes the regular salary paid to employees who are not working due to reasons like illness, pregnancy or injury.

Regular earnings may be paid by employers on a fixed-term or hourly basis.

Fixed-term regular earnings

A perfect example of fixed-term earning is your monthly salary. Such regular earnings are received after a fixed period of providing services, such as a month or a year.

Hourly regular earnings

Employees who earn wages based on the number of hours they work receive hourly regular earnings. Since a person might work for a different number of hours each day, their pay-check may vary from one period to another.

Regular earnings also include the portion of your salary which is deducted as part of any Employee Benefit Plan under an agreement between you and your employer. Even though this amount is not included in your gross salary, and thus not available to you on an immediate basis, it has been earned by you and invested in your future with your consent. Examples of such benefit plans include:

  • Retirement Plan contributions
  • Health and life insurance premiums
  • Short term disability plans
  • Deductions to cover the tuition or certification cost of any professional course – you have enrolled in at the organization – for your personal development.

Thus, every component of the payment you receive through a regular payroll system will be counted under the head of regular earnings.

What is not included in regular earnings?

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The additional wages paid on a non-regular basis are called supplemental wages. These are not included in regular earnings. Supplemental wages include:

Bonuses

A bonus is an additional payment made to employees at the discretion of their employer. It may be given as an appreciation for performance, or as a gift before any special occasion like Christmas. The purpose behind a bonus is to increase motivation and build morale of the employee.

Retroactive Pay

Sometimes an employer owes the employee a certain portion of his earnings from a previous period due to reasons like failing to account for a raise, forgetting to pay overtime, or miscalculation. When paid, this pending amount is referred to as retroactive pay.

Severance Pay

Severance pay is an optional payment (unless mandatory under your state laws). It is offered to an employee at the time of termination to help him cover expenses in the wake of unemployment.

Other types of supplemental payments which an employee receives – but are not classified as regular earnings – include:

  • Compensation for accrued time off
  • Contest awards
  • Tips earned by an employee
  • Overtime pay

How are regular earnings reported?

Employers can report the regular earnings paid by them in two ways, i.e., earned and paid basis.

When employers credit compensation with reference to the period in which the payment was actually made, irrespective of when the employee services were provided, it is referred to as paid basis.

When the amount is credited with reference to the period in which the employee services were utilized, it is referred to as earned basis.

Even though supplemental earnings seem very attractive, they should not be relied upon by an employee. Either they are one-time, occasional or uncertain. Therefore, any budgeting and planning must be done while keeping in mind one`s regular earnings.

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