Final answer:
Employers withhold various taxes and contributions from workers' paychecks, such as withholding tax and contributions to social security and insurance programs. Additionally, an implicit contract exists between employers and employees to keep wages stable during economic fluctuations. Contributions are also made to workman's compensation insurance for injured employees.
Step-by-step explanation:
Understanding Paycheck Deductions and Implicit Contracts in Employment
Employers are commonly responsible for withholding taxes from their workers' paychecks, a principle which involves deducting money for advance payment of income tax, social security contributions, and insurance programs such as unemployment and disability. This deduction is known as withholding tax, pay-as-you-earn tax (PAYE), or pay-as-you-go tax (PAYG). Moreover, employers contribute to various employment-related expenses out of their own funds, which include the employer's share of social security and other insurance programs.
In addition to mandated deductions, there is an implicit contract between employers and employees. This contract suggests that employers will avoid cutting wages during economic downturns, treating the wages as a form of insurance for the employees. Conversely, employees do not expect significant wage increases during economic upticks. This wage stabilization acts as a safeguard for employees against low wages during challenging times, in exchange for moderate wage increases when the economy is strong.
Furthermore, employers are required to contribute to workman's compensation insurance, a fund that compensates employees who are injured on the job. Contributions to this fund are typically a fixed percentage of the employee's salary and help provide financial assistance during their recovery period.