What Are Sources of Earned Income - Financial Literacy - أول ثانوي

1.4 What Are Types of Earned Income? Link to digital lesson Learning Objective Once you have completed this lesson, you should be able to: identify types of earned income, such as wages, salaries, tips, and commissions explain the advantages and disadvantages of different types of earned income. Key Terms Wage Overtime pay Private sector Minimum salary Salary Tip Public sector Commission Earned income is any income you receive from working. It includes wages, salaries, tips, commissions, and earnings from self-employment. Money you make without directly working, such as rent paid by tenants, or gifts of money, is referred to as "unearned income? Working Hours The government of Saudi Arabia places legal limits on what working hours and periods are allowed for employees in the Kingdom: ⚫ a maximum of 8 hours per day over 6 days OR 48 hours per week ⚫ no more than 10 hours in any one working day for most employees ⚫ at least 10 hours of a continuous rest period every 24 hours. An 8-hour day and 48-hour workweek are the standards in the Saudi workplace. Hours worked in addition to the standard are called over- time hours. وزارة التعليم 123-1465 www.lem.edu.sa CHAPTER Income 31

Would you prefer to be paid wages of a salary? Why? SALARY Wage a fixed amount of payment earned for labor for w determined time period Dvenime pily pay received for hours worked in addition to regular hours Wages Employees who work for wages are usually paid for each hour worked. Jobs which pay a wage are usually used for manual, retail, or contract work where working hours are flexible. There is usually a maximum number of hours that are worked every week or month. When employees must work overtime hours, they are entitled to extra pay called overtime pay. By law, overtime pay must be at least one and a half times the regular rate. People who work on holidays may be entitled to even higher pay rates for their hours. Although there are lots of advantages to earning wages, there are also some disadvantages, as shown in Figure 1.4.1. وزارة التعليم 32 Financial Literacy

WAGE Advantages Employees are paid for the hours actually worked. Work in addition to "normal hours" is paid as overtime and bonuses are often paid for working on holidays. Paid either monthly or weekly. Disadvantages If you do not work your regular hours, you will not be paid for them. Less benefits than salaried employ- ees, e.g. no holiday or sick pay. FIGURE 1.4.1 Advantages and Disadvantages of Payment by Wages In many jobs, new employees will begin with a lower wage because they do not yet have the education or experience to demand a higher wage rate. وزارة التعليم (123-1445 CHAPTER Income 33

Salary a fixed amount received each munth regardless of how many hours are worked Public sector part of the economy owned or controlled by the government Private sector part of the economy owned or controlled by private individuals or enterprises Minimum lay the lowest amount of pay per time period allowed by law Τίμ a gift of money, usually paid as a percentage of your bill, given to a person for performing a service Commission a set fer or percentage of a sale paid to an employee instead of, in addition to, salary or wages Salaries Some people work for a salary. Unlike people who work for wages, salaried workers rarely have to keep time cards or count hours worked. People who work for salaries often have jobs which are: ⚫ full time ⚫ permanent ⚫ with fixed working patterns. They also may have more flexibility in the times they work. However, they do not receive overtime pay for any additional hours worked beyond 48 hours a week. Salaries may differ between the public sector and the private sec- tor. The official minimum salary in Saudi Arabia in 2022 is SAR 4,000 per month for citizens. Tips and Commissions Some workers receive tips in addition to wages. The amount of the tip may be based on the quality of service provided. For example, many service employees, such as waiters and hair stylists, receive tips from satisfied customers. Some workers make most of their earnings from tips rather than hourly pay. Some workers are paid a coinmission. Sales commissions are earned only when a sale is made. If no sale is made, no commission is received. In some types of jobs, such as real estate sales, the worker's entire earnings may be based on commission. For example, in Saudi Arabia, a real estate agent who sells a home receives 2.5% of the sale value, so if a home is sold for SAR 300,000, the real estate agent would receive a commission of SAR 7,500. In other types of jobs, workers may be paid a base salary plus commission. For example, a person who sells cars might receive a salary of SAR 80,000 a year plus 15% of the profit on each car sold. وزارة التعليم 34 Financial Literacy

Review Questions Choose the correct answer. 1. Which of the following is an advantage of a salary? a. regular payment each month b. increased reward for working more hours c. employees have to complete time cards d. varied work patterns 2. Minimum salaries are guaranteed for all employees in Saudi Arabia. a. true b. false 3. Employees in full-time, permanent jobs with fixed working patterns usually work for wages. a. true b. false 4. Which of the following describes an advantage of tips? a. tips are regular income b. earning tips helps you to budget accurately c. income is improved by providing quality service d. tips are received from unsatished customers 5. In which of the following roles could payment by commission be a positive motivator? a. doctor b. teacher c. salesperson d. judge 6. There are no limits to working hours in Saudi Arabia. a. true b. false وزارة التعليم 2021-1445 CHAPTER J Income 35