2. Chapter 9 Payroll McGraw-Hill/Irwin
Copyright © 2006 by The McGraw-Hill Companies, Inc. All rights reserved.

3. 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

4. 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

5. Payroll Cycles

6. 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

7. 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
Over
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

8. 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

9. Variable Commission Scale
Different commission rates for different levels of net sales
Up to $25, %
Excess of $25,000 to $40, %
Over $40, %
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

10. 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

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

12. Federal Income Tax Withholding (FIT)
1. Percentage Method

13. Table 9-3,9-4 Percentage method income tax withholding tables
One
Withholding
Payroll Period Allowance
Weekly $
Bi weekly
Semimonthly
Monthly
Quarterly
SemiAnnually
Daily or miscellaneous (each
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 --
$ $429 10% $154
$ $1,245 $27.50 plus 15% $429
$1, $2,270 $ plus 25% $1,245
$2, $3,568 $ plus 28% $2,270
$3, $6,271 $ plus 33% $3,568
$6,271…… $ plus 35% $6,271

14. 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
$1,880.76
2) Subtract step 1 from employees pay
$1,880.76
-1,245.00 $
Tax $ ($635.76)
$ = $308.84
3) In table 9.2 locate appropriate table and compute income tax

15. 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