1. Unit 43 Paycheck Calculation

2. Basic Principles of Paycheck Calculation Two main terms are used regarding payroll: gross pay and net pay. –Gross pay is the total amount of money earned for hours worked. –Net pay, often called “take-home pay,” is the amount of money left after all deductions have been subtracted from the gross pay.

3. Calculating Gross Pay To determine gross pay, multiply the wage per hour times the number of hours worked. Overtime pay is usually calculated at time and a half or double time. –If overtime is one and a half, multiply the overtime hours by 1.5 and then multiply by the wage per hour. –For double time, multiply the overtime hours by two and then multiply by the wage per hour.

4. Calculating Net Pay To determine net pay, individual deductions must be calculated first. –Tables are used to determine the appropriate deduction. –Use the most recent tax tables available.

5. Calculating Net Pay To calculate the deduction for state income tax, similar tables are available in many states. –In other states, the state income tax is a percent of gross income and the deduction is determined by multiplying the state percent times the gross pay.

6. Calculating Net Pay The deduction for FICA (Social Security) includes 6.2% of the first $106,800 income and a Medicare deduction of 1.45% of the total in income for a total deduction of 7.65%, or 0.0765 in decimals. –The gross pay is multiplied by this percent to obtain the correct deduction for FICA.

7. Calculating Net Pay City or township taxes are usually a percent of gross income and are calculated the same way state tax is calculated. To calculate the net pay, all of the deductions must be subtracted from the gross pay.

8. Basic Principles of Paycheck Calculation Example: A geriatric assistant earns a gross pay of $561.05 for one week. His state income tax is 2 ½ percent, or 0.025 when converted to decimals. What is the deduction for state income tax? Gross Pay x Percent of Tax = Deduction for State Tax $561.05 x 0.025 (2 ½ %) = $14.02625 $14.03 = Deduction for State Tax

9. Practical Problem A registered nurse (RN) works 47.5 hours at an hourly wage of $28.72. He earns time and a half for all hours over 40 hours. What is his gross pay?

10. Practical Problem Hourly wage x hours worked = regular gross pay 40 x $28.72 = $1,148.80 Hourly wage x hours worked x 1.5 = overtime gross pay $28.72 x 7.5 x 1.5 = $323.10 Regular gross pay + overtime gross pay = total gross pay $1,148.80 + $323.10 = $1,471.90 The RN’s gross pay is $1,471.90.