Income (Junior Cert Business Studies): Revision Notes
Income
What is income?
Money is essential for purchasing the goods and services we need and want in our daily lives. The money that flows into a person's or household's possession is called income.
Income refers to money received by an individual or household.
Income allows people to meet their basic needs (like food, shelter, and clothing) and fulfil their wants (things they would like to have but don't necessarily need). Understanding different types of income helps people make better financial decisions and manage their money effectively.
The distinction between needs and wants is crucial for effective budgeting and financial planning. Needs are essential for survival, while wants improve quality of life but aren't strictly necessary.
Regular and irregular income
Income can be categorised into two main types based on when it's received:
Regular income
Regular income arrives at predictable intervals, such as weekly, fortnightly, or monthly. This type of income provides financial stability because people can rely on receiving it consistently.
Examples of Regular Income:
- Monthly salary from employment - like a teacher receiving €2,500 every month
- Weekly pension payments - a retiree getting €150 every week
- Fortnightly benefit payments - receiving €300 every two weeks from government support
Irregular income
Irregular income arrives unpredictably - sometimes frequently, sometimes rarely, and often in varying amounts. This type of income cannot be relied upon for regular expenses.
Examples of irregular income include:
- Birthday money from relatives
- Bonus payments at work
- Prize winnings
Both individuals and households typically receive income from multiple sources, combining regular and irregular types.
Financial experts recommend building an emergency fund when you have irregular income, as it helps manage the uncertainty of when money will arrive.
Sources of regular income
Employment income
A wage or salary represents payment for work performed. This forms the primary income source for most working people. For instance, a shop assistant might receive weekly wages, whilst an office manager typically earns a monthly salary.
Government benefits
Several government payments provide regular income support:
- Grants are monetary awards that don't require repayment. The government or European Union typically provides these. Students often receive grants to help with college expenses.
- Jobseeker's Allowance supports unemployed individuals who are actively seeking work.
- State Pension provides income for people aged 66 and over who have retired from work and no longer earn wages or salaries.
- Child Benefit is a monthly payment to parents or guardians caring for children under 16 (or under 18 if in full-time education).
Government benefits form an important part of the social safety net, ensuring people have basic income support during different life circumstances.
Sources of irregular income
Work-related irregular income
- Overtime compensates employees for working additional hours beyond their normal schedule. For example, shop staff might earn overtime pay during busy holiday periods.
- Bonus payments reward employees for good performance or reaching targets. Sales staff often receive bonuses for exceeding sales goals, or employees might get Christmas bonuses.
Financial irregular income
- Loans provide borrowed money from financial institutions like banks or building societies. The borrowed amount must be repaid with interest over time.
- Dividends represent a share of company profits paid to shareholders. People who own shares in companies can receive these profit distributions.
- Interest rewards people for saving money with financial institutions. The more money saved, the more interest earned. Interest rates are typically expressed as percentages.
- Tax refunds occur when people have overpaid their taxes, and the tax office returns the excess amount.
Remember that loans must be repaid with interest, so while they provide immediate income, they create future financial obligations.
Other irregular income
- Inheritance consists of money or valuable items (such as property or jewellery) received when family members or friends pass away.
- Gifts and winnings from sources like lottery tickets also count as irregular income.
Benefit-in-kind
Not all income comes as cash payments. Some employees receive benefit-in-kind (BIK), which refers to goods or services provided instead of money.
Benefit-in-kind means non-monetary compensation received in exchange for work.
Common examples of benefit-in-kind include:
- Company cars for employees
- Free or subsidised meals for restaurant staff
- Health insurance paid by employers
- Discounted clothing for retail workers
Companies often provide these benefits because they understand that satisfied employees typically perform better. Benefits and perks help keep staff happy and motivated in their roles.
Real-World Example: Google's Employee Benefits
Google is famous worldwide for the extensive benefits it offers employees, including:
- Free meals and snacks throughout the day
- On-site fitness facilities and wellness programmes
- Flexible working arrangements and remote work options
- Free shuttle transportation
- On-site healthcare services
These benefits attract talented workers and encourage them to stay with the company, reducing staff turnover costs.
Key Points to Remember:
- Income is money received by individuals or households to purchase goods and services
- Regular income arrives at predictable intervals (like monthly salaries), whilst irregular income comes unpredictably (like bonuses or gifts)
- Regular income sources include wages, government benefits, pensions, and grants
- Irregular income sources include overtime, bonuses, loans, dividends, interest, and inheritance
- Benefit-in-kind provides non-monetary compensation like company cars or free meals instead of cash payments