Chapter 9 Payroll

Learning Unit Objectives #9 Payroll Learning Unit Objectives Calculating Various Types of Employees’ Gross Pay LU9.1 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

Learning Unit Objectives #9 Payroll Learning Unit Objectives Computing Payroll Deductions for Employees’ Pay; Employers’ Responsibilities LU9.2 Prepare and explain the parts of a payroll register Explain and calculate federal and state unemployment taxes

Payroll Cycles

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

Hourly Rate of Pay; Calculation of Overtime Employee M T W Th F S Total R Valdez 13 8.5 10 8 11.25 10.75 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

Straight Piece Rate Pay Gross pay = Number of units produced x Rate per unit Ryan Foss produced 900 dolls. He is paid $.96 per doll. Calculate his gross pay 900 x $.96 = $864

Differential Pay Schedule Gross pay = Number of units produced x Various rates per unit Logan Company pays Abby Rogers on the basis of the following schedule: Units Amount produced per unit 1-50 $ .50 51-150 .62 151-200 .75 Over 200 1.25 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

Straight Commission with Draw 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? Commission is a certain percentage of the amount a salesperson sells. Draw is an advance on the salesperson’s commission ($56,000 x .15) = $8,400 -600 $7,800

Variable Commission Scale Different commission rates for different levels of net sales Last month Jane Ring’s net sales were $160,000. What is Jane’s gross pay based on the schedule? Up to $35,000 4% Excess of $35,000 to $45,000 6% Over $45,000 8% ($35,000 x .04) + ($10,000 x .06) + ($115,000 x .08) = $11,200

Salary Plus Commission Gross Pay = Salary + Commission 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

Payroll Register Rate Base Social Security 6.20% $97,500 Medicare 1.45 No Base

Federal Income Tax Withholding (FIT) 1. Percentage Method

Table 9-1,9-2 Percentage method income tax withholding tables One Withholding Payroll Period Allowance Weekly $ 70.19 Bi weekly 140.38 Semimonthly 152.08 Monthly 304.17 Quarterly 912.50 SemiAnnually 1825.00 Daily or miscellaneous (each 14.04 day of the payroll period) Partial (b) MARRIED person - if the amount of wages (after subtracting The amount of income tax withholding allowances) is: to withhold is: Not over $154 $0 Over -- But not over -- of excess over -- $154 $461 10% $154 $461 $1,455 $30.70 plus 15% $461 $1,455 $2,785 $179.80 plus 25% $1,455 $2,785 $4,165 $512.30 plus 28% $2,785 $4,165 $7,321 $898.70 plus 33% $4,165 $7,321…… $1940.18 plus 35% $7,321

Percentage Method 1) Locate one withholding allowance and multiply by the number of allowances employee claims $70.19 x 2 = $140.38 $2,250.00 - 140.38 $2,109.62 2) Subtract step 1 from employees pay $2,109.62 -1,455.00 $ 654.62 Tax $179.80 + .25 ($654.62) $179.80 + 163.66 = $343.46 3) In table 9.2 locate appropriate table and compute income tax

Employers’ Responsibilities Federal Unemployment Tax Act (FUTA)- 6.2% 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 *State Unemployment Tax Act (SUTA)- 5.4% tax on the first $7,000 paid to employees as wages during the calendar year *Can be credited against the 6.2% federal rate. Assume a company has total wages of $20,000 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 .054 = $928, FUTA = $16,000 x .008 = $128