In this chapter, the learning objectives are: Define, compare, and contrast weekly, biweekly, semimonthly, and monthly pay periods; calculate gross pay with overtime on the basis of time; calculate gross pay for piecework, differential pay schedule, straight commission with draw, variable commission scale, and salary plus commission;...
Payroll McGrawHill/Irwin Chapter Nine Copyright © 2014 by The McGrawHill Companies, Inc. All rights reserved Learning unit objectives LU 9-1: Calculating Various Types of Employees’ Gross Pay Define, compare, and contrast weekly, biweekly, semimonthly, and monthly pay periods Calculate gross pay with overtime on the basis of time Calculate gross pay for piecework, differential pay schedule, straight commission with draw, variable commission scale, and salary plus commission LU 9-2: Computing Payroll Deductions for Employees’ Pay; Employers’ Responsibilities Prepare and explain the parts of a payroll register Explain and calculate federal and state unemployment taxes 92 Payroll Cycles 93 Hourly Rate of Pay; Calculation of Overtime Gross pay = Hours employee worked x Rate per hour Hourly overtime pay rate = Regular hourly pay rate x 1.5 Gross pay =Earnings for 40 hours + Earnings at time-and-a-half rate 94 Hourly Rate of Pay; Calculation of Overtime Employee M T W Th R Valdez 13 8.5 10 F 11.25 S 10.75 Total 61.5 *Rate is $9.00 per hour Hourly overtime pay rate = Regular hourly pay rate x 1.5 Gross pay = Earnings for 40 hours + Earnings at time-and-a-half rate 61.5 – 40 = 21.5 overtime hours $9 x 1.5 = 13.50 overtime rate (40 hours x $9) + (21.5 hours x 13.5) $360 + $290.25 = $650.25 95 Straight Piece Rate Pay Gross pay = Number of units produced x Rate per unit Example: Ryan Foss produced 900 dolls He is paid $.96 per doll Calculate his gross pay 900 x $.96 = $864.00 96 Differential Pay Schedule Gross pay = Number of units produced x Various rates per unit Example: Logan Company pays Abby Rogers on the basis of the following schedule: Last week Abby produced 300 dolls What is Abby’s gross pay? (50 x $.50) +(100 x $.62)+(50 x $.75) + (100 x $1.25) = $249.50 97 Straight Commission with Draw Commission is a certain percentage of the amount a salesperson sells Draw is an advance on the salesperson’s commission Example: Logan Company pays Jackie Okamoto a straight commission of 15% on her net sales (net sales are total sales less sales returns) In May, Jackie had net sales of $56,000 Logan gave Jackie a $600 draw in May What is Jackie’s gross pay? ($56,000 x 15) = $8,400 600 $7,800 98 Variable Commission Scale Different commission rates for different levels of net sales Example: Up to $35,000 4% Excess of $35,000 to $45,000 Over $45,000 6% Last month, Jane Ring’s net sales were $160,000 What is Jane’s gross pay based on the schedule? 8% ($35,000 x 04) + ($10,000 x 06) + ($115,000 x 08) = $11,200 99 Salary Plus Commission Gross pay = Salary + Commission Example: Logan Company pays Joe Roy a $3,000 monthly salary plus a 4% commission for sales over $20,000 Last month Joe’s net sales were $50,000 Calculate Joe’s gross pay $3,000 + ($30,000 x 04) = $4,200 910 Payroll Register Rate Base Social Security 6.20% Medicare 1.45 $110,100 No Base 911 Federal Income Tax Withholding (FIT) Percentage Method 912 Percentage method income tax withholding tables TABLE 9.1 TABLE 9.2 (Partial) You can use the percentage method to calculate federal income tax withholding (FIT) 913 Percentage Method Example: Alice Rey earns $2,250 for week 47 She is married with two allowances Step In Table 9.1, locate the weekly withholding for one $73.08 x = $146.16 allowance Multiply this number by $2,250.00 146.16 $2,103.84 Step Subtract Step from employee’s pay Step In Table 9.2, locate appropriate table and compute income tax $2,103.84 1,515.00 $ 588.84 Tax $187.15 + 25 ($588.81) $187.15 + 147.21 = $334.36 914 Employers’ Responsibilities Federal Unemployment Tax Act (FUTA) — 6.2% tax on the first $7,000 paid to employees as wages during the calendar year State Unemployment Tax Act (SUTA) *– 5.4% tax on the first $7,000 paid to employees as wages during the calendar year 6.2% FUTA 5.4% SUTA credit 8% FUTA tax *Can be credited against the 6.2% federal rate Example: Assume a company has total wages of $19,000 and $4,000 of the wages are exempt from SUTA What are the company’s SUTA and FUTA taxes if the company’s SUTA rate is 5.8% due to a poor employment record? $20,000 $4,000 (exempt wages) = $16,000 SUTA = $16,000 x 058 = $928; FUTA = $16,000 x 008 = $128 915 ... scale, and salary plus commission LU 9-2 : Computing Payroll Deductions for Employees’ Pay; Employers’ Responsibilities Prepare and explain the parts of a payroll register Explain and calculate... pay rate = Regular hourly pay rate x 1.5 Gross pay =Earnings for 40 hours + Earnings at time-and-a-half rate 94 Hourly Rate of Pay; Calculation of Overtime Employee M T W Th R Valdez 13 8.5... pay rate = Regular hourly pay rate x 1.5 Gross pay = Earnings for 40 hours + Earnings at time-and-a-half rate 61.5 – 40 = 21.5 overtime hours $9 x 1.5 = 13.50 overtime rate (40 hours x $9) + (21.5