bake - April 2016 - 12

management

Raises vs. Beneﬁts
Companies that have survived the economic downturn of
the past several years may be in a position now to reward
employees that hung in during tough times, according to the
US Small Business Administration (SBA). Many workers have
not had raises or have even seen wages and beneﬁts cut.
Before you jump to offer a raise, think about the best way to
reward your staff from a tax perspective.
When you increase a worker's pay, it costs the company more
than the actual addition to the paycheck. The company must

From the employee's
perspective, a wage increase
is really worth only as much
as they can keep after tax.
US Small Business Administration

factor in the following:
x The employer's share of FICA (to cover Social Security and
Medicare taxes)
x State unemployment insurance. Each state sets its own
rates for this cost, which is collected as a tax on wages
paid. (The federal unemployment tax (FUTA) is assessed
only on the ﬁrst $7,000 of wages, so a pay increase likely
won't impact this employer cost.)
x Beneﬁt formulas. For example, if you make contributions
to a qualiﬁed retirement plan, it is based on compensation.
Say you contribute 10 percent of employees' compensation
to the plan each year. A $2,000 wage increase means an
additional $200 cost to the company.
The bottom line for the employer in giving a wage increase,
according to SBA, is that you must ﬁgure anywhere between 15
percent and 50 percent of that increase as an extra cost to the
company. In other words, a $2,000 wage increase really costs
you $2,400.
From the employee's perspective, a wage increase is really
worth only as much as they can keep after tax. For example, if
an employee is in the 25 percent tax bracket, a $2,000 wage
increase nets $1,500 after income tax (even less when the
employee's share of FICA is factored in).
So instead of giving a wage increase, why not offer a fringe
beneﬁt? The beneﬁt can cost the company less - there may be
no employment taxes on the beneﬁt-while providing a valued
item or service to the employee.

12 < APR 2016 | bakemag.com

NONTRADITIONAL
BENEFITS

http://www.bakemag.com

bake - April 2016

Table of Contents for the Digital Edition of bake - April 2016

bake - April 2016
Editor's Note - The Design Issue: The Premium Experience
Table of Contents
News Bites - Barry Callebaut Completes Expansion
FDA to Delay Labeling Rules
Wisconsin Names Bakery of Year
Lawrence Foods Earns Award
Caterers Impress with Desserts
Pretzel Brand Seeks Franchisees
Personality - Thomas Keller
Management - Raises vs. Benefits
Labor Front - Minimizing Safety Risks
Ingredients - A Passion for Passion Fruit
Equipment - Ensuring Compliance
Sharp Image
Display Elegance
Food Photography
Migrating Millennials
Local Connections
Tim Hortons on the Move
Graduation Cakes
Nontraditional Holidays
Cafe - Salad Days
Cold Brew Coffee
Products
Product Showcase
Classifieds
Ad Index
Online - BakeMag.com
bake - April 2016 - bake - April 2016
bake - April 2016 - 2
bake - April 2016 - Editor's Note - The Design Issue: The Premium Experience
bake - April 2016 - 4
bake - April 2016 - 5
bake - April 2016 - Table of Contents
bake - April 2016 - 7
bake - April 2016 - Pretzel Brand Seeks Franchisees
bake - April 2016 - 9
bake - April 2016 - Personality - Thomas Keller
bake - April 2016 - 11
bake - April 2016 - Management - Raises vs. Benefits
bake - April 2016 - 13
bake - April 2016 - Labor Front - Minimizing Safety Risks
bake - April 2016 - 15
bake - April 2016 - Ingredients - A Passion for Passion Fruit
bake - April 2016 - 17
bake - April 2016 - Equipment - Ensuring Compliance
bake - April 2016 - 19
bake - April 2016 - Sharp Image
bake - April 2016 - 21
bake - April 2016 - 22
bake - April 2016 - 23
bake - April 2016 - 24
bake - April 2016 - 25
bake - April 2016 - 26
bake - April 2016 - 27
bake - April 2016 - 28
bake - April 2016 - 29
bake - April 2016 - Display Elegance
bake - April 2016 - 31
bake - April 2016 - 32
bake - April 2016 - 33
bake - April 2016 - Food Photography
bake - April 2016 - 35
bake - April 2016 - 36
bake - April 2016 - 37
bake - April 2016 - Migrating Millennials
bake - April 2016 - 39
bake - April 2016 - Local Connections
bake - April 2016 - 41
bake - April 2016 - Tim Hortons on the Move
bake - April 2016 - 43
bake - April 2016 - 44
bake - April 2016 - 45
bake - April 2016 - Graduation Cakes
bake - April 2016 - 47
bake - April 2016 - 48
bake - April 2016 - 49
bake - April 2016 - Nontraditional Holidays
bake - April 2016 - 51
bake - April 2016 - 52
bake - April 2016 - 53
bake - April 2016 - Cafe - Salad Days
bake - April 2016 - 55
bake - April 2016 - Cold Brew Coffee
bake - April 2016 - Products
bake - April 2016 - Product Showcase
bake - April 2016 - Classifieds
bake - April 2016 - 60
bake - April 2016 - 61
bake - April 2016 - 62
bake - April 2016 - 63
bake - April 2016 - 64
bake - April 2016 - 65
bake - April 2016 - Ad Index
bake - April 2016 - Online - BakeMag.com
bake - April 2016 - 68
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