Types of Pay

Before anyone can plan a budget or open a savings account, they need to know how their paycheque is actually calculated. Employers pay workers in several different ways, and each method uses its own formula. This lesson covers the four types of pay you need to recognize in Grade 8: hourly wage, salary, commission, and piece rate, plus how overtime changes the calculation.

An hourly wage pays a fixed amount of money for every hour worked. Gross pay (pay before deductions) is found with:

\( P = r \times h \)

where \( r \) is the hourly rate and \( h \) is the number of hours worked. For example, if Priya earns \(15\) dollars per hour and works \(8\) hours in a day, her pay for that day is \( 15 \times 8 = 120 \) dollars. Over a \(40\)-hour week, she would earn \( 15 \times 40 = 600 \) dollars.

In Ontario, most hourly employees who work more than \(44\) hours in a week must be paid overtime for the extra hours, usually at "time and a half":

\( r_{OT} = 1.5 \times r \)

If Priya's regular rate is \(15\) dollars per hour and she works \(48\) hours in a week, her regular pay covers the first \(44\) hours: \( 15 \times 44 = 660 \) dollars. The remaining \(4\) hours are paid at \( 1.5 \times 15 = 22.50 \) dollars per hour, adding \( 22.50 \times 4 = 90 \) dollars. Her total gross pay for the week is \( 660 + 90 = 750 \) dollars.

A salary is a fixed total amount agreed on for a year, regardless of the exact hours worked. To find a weekly or hourly equivalent, divide the annual salary by the number of pay periods. If Marcus earns an annual salary of \(52000\) dollars and is paid weekly (\(52\) pay periods), his weekly pay is:

\( \dfrac{52000}{52} = 1000 \)

That works out to \(1000\) dollars every week no matter how many hours he actually works that week. If he typically works \(40\) hours, this is roughly equivalent to an hourly rate of \( \dfrac{1000}{40} = 25 \) dollars per hour, though a salaried worker is not usually paid extra for occasional overtime.

Commission pays a percentage of the value of sales a person makes, and is common in retail and sales jobs. The formula is:

\( C = p \times S \)

where \( p \) is the commission rate (written as a decimal) and \( S \) is total sales. If a car salesperson earns a \(5\) percent commission and sells \(20000\) dollars worth of vehicles in a month, their commission is \( 0.05 \times 20000 = 1000 \) dollars. Some jobs combine a small base salary with commission, so total pay is the base amount plus \(C\).

Piece-rate pay is based on the number of items produced or tasks completed, not the time spent. The formula is:

\( P = u \times n \)

where \( u \) is the pay per unit and \( n \) is the number of units. If a fruit picker is paid \(2.50\) dollars per basket and fills \(300\) baskets in a week, their pay is \( 2.50 \times 300 = 750 \) dollars. Piece rate rewards speed and output, so two workers doing the same job can end up with very different pay.

Comparing pay types matters when deciding between job offers or predicting how much you will bring home in a month. A salary gives predictable pay, an hourly wage rewards extra hours with overtime, commission rewards strong sales, and piece rate rewards fast, high-volume work. Once you know your gross pay, the next step is understanding income and savings, since deductions and savings goals both depend on how much you actually earn. Many employers deposit gross pay directly into a bank account, so it also helps to know how deposits and withdrawals are tracked there.

Suppose Alicia is offered either an hourly job paying \(18\) dollars per hour for \(35\) hours a week, or a piece-rate job paying \(4\) dollars per unit if she can complete about \(50\) units a week.

Hourly option: \( 18 \times 35 = 630 \) dollars per week.

Piece-rate option: \( 4 \times 50 = 200 \) dollars per week.

In this case, the hourly job pays more for a typical week, but if Alicia became faster and completed \(160\) units in a week, the piece-rate job would pay \( 4 \times 160 = 640 \) dollars, slightly more than the hourly option. Comparing gross pay this way is also useful once you start budgeting, since your monthly budget depends on which type of pay you actually receive.

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• On Grade 8