Overview: Business owners that make a large investment in payroll need to make a small investment in time to explain how wages work.

By Gordon Hecht, Serta Simmons

Payroll has sure changed for those of us who have been in the workforce for 25 years or more (that means starting in 1995!)The word “Payroll” comes from the 19th century practice of rolling gold coins though a tube or pipe from the paymaster to the workers. While today’s retail veterans didn’t experience that, many of us remember getting paper checks that we had to deposit in a bank building, and occasionally getting some paper cash money for winning a sales contest. Those checks had two parts-the good part with the money, and the paycheck statement that showed us the deductions paid to Uncle Sam, that FICA fella, and various state taxes and insurance people.

Prior to 1940 most 20th century Americans received a pay envelope with cash-every penny they earned. Payroll deductions for income tax did not start until just prior to World War II. In a lot of ways, employers and employees were lucky-they got to see how much they made, and how much later was paid in taxes. They had a real feel for their pay.

Today, few people see a paper paycheck-most have a wonderful option called Direct Deposit.  Often, they don’t know what their pre-tax income is.  They only see what’s left-and while that is net, it is usually (80s Flashback Warning)GROSS too!

The result is that employers are paying out (on average) $900 a week and employees think they are making $698.

Those of you who are (70s Flashback Warning) signing the paychecks are thinking “$900 is just the start! I have to pay additional Social Security, Unemployment tax, Workers Comp tax, and Health insurance on top of that”! It’s true, paying your devoted employee $900 a week probably means an investment of $1200 a week or more.

Payroll and pay rates are sensitive subjects and should not be part of a group discussion. Business Owners and managers should, however, take time for one-on-one conversations about paychecks, deductions, and fringe benefit costs. Helping your team understand business costs and how they affect your organization is vital to your survival and growth, and helps your people become wiser about finances.


Gordon Hecht is Senior Regional Manager/Strategic Retail Group at Serta Simmons Bedding and a regular contributor to YSN. You can reach him at ghecht@sertasimmons.com.