Chapter 9 Payroll McGraw-Hill/Irwin Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights reserved.

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, 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

Straight Piece Rate Pay; Differential Pay Schedule Gross pay = Number of units produced x Rate per unit Differential Pay Schedule Gross pay = Number of units produced x Various rates per unit Units Amount produced per unit 1-50 $1.00 51-200 1.50 Over 200 1.75 Rob produced 225 dolls. He is paid $1.25 per doll. Calculate his gross pay 225 x $1.25 = $281.25 (50 x $1.00) +(150 x $1.50)+(25 x $1.75) = $318.75

Straight Commission with Draw Larry is paid a straight commission of 8%. His computer net sales were $100,000. Larry’s draw was $750. What is his gross pay? Commission is a certain percentage of the amount a salesperson sells. Draw is an advance on the salesperson’s commission ($100,000 x .08) = $8,000 -750 $7,250

Variable Commission Scale Different commission rates for different levels of net sales Up to $25,000 5% Excess of $25,000 to $40,000 7% Over $40,000 8% Juanita’s net sales were $120,000. What is her gross pay based on the schedule? ($25,000 x .05) + ($15,000 x .07) + ($80,000 x .08) = $8,700

Salary Plus Commission Gross Pay = Salary + Commission Chung receives a salary of $2,500 per month. He also receives a 5% commission for sales over $15,000. Last month’s sales were $75,000. Calculate Chung’s gross pay. $2,500 + ($60,000 x .05) = $5,500

Payroll Register Rate Base Social Security 6.20% $87,900 Medicare 1.45 No Base

Federal Income Tax Withholding (FIT) 1. Percentage Method

Table 9-3,9-4 Percentage method income tax withholding tables One Withholding Payroll Period Allowance Weekly $ 59.62 Bi weekly 119.23 Semimonthly 129.17 Monthly 258.33 Quarterly 775.00 SemiAnnually 1550.00 Daily or miscellaneous (each 11.92 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 $124 $0 Over -- But not over -- of excess over -- $154 $429 10% $154 $429 $1,245 $27.50 plus 15% $429 $1,245 $2,270 $149.90 plus 25% $1,245 $2,270 $3,568 $406.15 plus 28% $2,270 $3,568 $6,271 $769.59 plus 33% $3,568 $6,271…… $1661.58 plus 35% $6,271

Percentage Method 1) Locate one withholding allowance and multiply by the number of allowances employee claims $55.62 x 2 = $119.24 $2,000.00 - 119.24 $1,880.76 2) Subtract step 1 from employees pay $1,880.76 -1,245.00 $ 635.76 Tax $149.90 + .25 ($635.76) $149.90 + 158.94 = $308.84 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 *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. Employee earns $9,000 in the first quarter. How much does the employer pay in FUTA & SUTA? SUTA = $7,000 x .054 = $378, FUTA = $7,000 x .008 = $56