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CHAPTER 10 Payroll

CHAPTER 10 Payroll. Learning Outcomes. 10-1. Find the gross pay per paycheck based on salary. Find the gross pay per weekly paycheck based on hourly wage. Find the gross pay per paycheck based on piecework wage. Find the gross pay per paycheck based on commission.

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CHAPTER 10 Payroll

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  1. CHAPTER 10 Payroll

  2. Learning Outcomes 10-1 • Find the gross pay per paycheck based on salary. • Find the gross pay per weekly paycheck based on hourly wage. • Find the gross pay per paycheck based on piecework wage. • Find the gross pay per paycheck based on commission.

  3. Find gross pay per paycheck based on salary 10-1-1 Section 10-1 Gross Pay • Pay periods: • Weekly: once a week or 52 times a year. • Biweekly: every two weeks or 26 times a year. • Semimonthly: twice a month or 24 times a year. • Monthly: once a month or 12 times a year.

  4. Nicole earns $36,000 a year andis paid on a weekly basis. What is her gross pay per week? Divide $36,000 by 52 pay periods. $692.31 What if she is paid on a semimonthly basis? $1,500.00 Find the gross earnings per pay period HOW TO: Section 10-1 Gross Pay

  5. Find the gross earnings for: Examples… Section 10-1 Gross Pay • Carolyn, who earns $15,000 a year and is paid weekly. • $288.46 • Martha, who earns $48,000 a year and is paid biweekly. • $1,846.15 • Bill, who earns $35,000 a year and is paid semimonthly. • $1,458.33

  6. Gross earnings(gross pay) The amount earned before deductions. Net earnings(net pay/take-home pay) The amount of your paycheck. Hourly rate or hourly wage The amount of pay per hour worked based on a standard 40 hour work week. Key Terms… Section 10-1 Gross Pay

  7. Hourly rate or hourly wage The amount of pay per hour worked based on a standard 40 hour work week. Overtime rate Rate of pay for hours worked that exceed 40hours per week. Time and a half Standard overtime rate that is 1½ (or 1.5) timesan hourly rate. Key Terms… Section 10-1 Gross Pay

  8. Regular pay Earnings based on an hourly rate of pay. Overtime pay Earnings based on overtime rate of pay. Key Terms… Section 10-1 Gross Pay

  9. STEP 1 Find the regular pay by multiplying the number of hours(40 or less) by the hourly wage. STEP 2 Find the overtime pay by multiplying the hourly rate by the overtime rate (usually 1.5) and then multiply that rate by the number of hours that exceed 40. STEP 3 Add the figures from Step 1 and Step 2. Gross pay per week based on hourly wages 10-1-2 Section 10-1 Gross Pay

  10. Gross pay per week based on hourly wages 10-1-2 Section 10-1 Gross Pay Theresa worked 45 hours last week. If her hourly rate is $10.50/hour, find her total gross earnings. Multiply 40 x $10.50 = $420.00 To calculate the overtime amount, multiply her hourly rate by 1.5: $10.50 x 1.5 = $15.75 Multiply the overtime rate ($15.75) x the number of overtime hours (5): $15.75 x 5 = $78.75 Add the regular and overtime pay: $498.75

  11. Marcus, who worked 48 hours $338 Allison, who worked 44 hours. $299 Examples… Section 10-1 Gross Pay The regular hourly rate in the production department for these employees is$6.50, and overtime is paid at 1.5. Find the weekly earnings for these employees:

  12. Gross pay per paycheck based on piecework 10-1-3 Section 10-1 Gross Pay • Many employers motivate employees to produce more by paying according to the quantity ofacceptable • Such piecework rates are typically offered in production or manufacturing jobs.

  13. Piecework rate Amount of pay for each acceptable item produced. Straight piecework rate Piecework rate where the pay per piece is thesame no matter how many items are produced. Differential (escalating) piece rate Piecework rate that increases as more itemsare produced. Key Terms… Section 10-1 Gross Pay

  14. Jorge assembles microchip boards.He is paid on a differential piecework basis. If he assembles 317 boards how much will he earn? An Example… Section 10-1 Gross Pay Rates are as follows: From 1-100 $1.32 per board From 101-300 $1.42 per board 301 and over $1.58 per board

  15. Rates are as follows: From 1-100 $1.32 per board From 101-300 $1.42 per board 301 and over $1.58 per board An Example… Section 10-1 Gross Pay 100 x $1.32 = $132.00 101 to 300 = 200 x $1.42 = $284.00 17 x $1.58 = $ 26.86 Total earnings:$442.86

  16. Try this example Jillian gets paid a differential piece rate foreach shirt she sews. Consult the chart and calculate her weekly earningsif she sewed 352shirts last week. An Example… Section 10-1 Gross Pay From 1-100: $0.47 each From 101-300: $0.60 each 301 and above: $0.70 each What were her earnings? $203.40

  17. Gross pay per paycheckbased on commission 10-1-4 Section 10-1 Gross Pay • Many salespeople earn a commission, a percentage based on sales.

  18. Commission: Earnings based on sales. Straight commission Entire pay based on sales. Salary plus commission A set amount of pay plus an additional amount based on sales. Key Terms… Section 10-1 Gross Pay

  19. Commission rate: Percent of sales that are eligible for a commission. Quota A minimum amount of sales that is required before a commission is applicable. Key Terms… Section 10-1 Gross Pay

  20. Marisa is a restaurant supplies salesperson and receives 6% of her total sales as commission.Her sales totaled $12,000 during a given week.Find her gross earnings. Use the formula: P = R x Bto find her earnings. P = 0.06 x $12,000 = $720 Marisa’s earnings are $720 An Example… Section 10-1 Gross Pay

  21. Melanie Brooks works for a cosmetics company and earns $200 a week in salary plus 30% commission on all sales over $500. She had sales of $1,250 last week. How much were her total earnings? Her salary would be $200 plus any applicable commission. The commission would be calculated at 30% on $750in sales or $225. Add this amount to her base salary. The total is $425. An Example… Section 10-1 Gross Pay

  22. EXERCISE SET A 1. Find the gross earnings for the employee. A regular week is 40 hours and the overtime rate is 1.5 times the regular rate. M T W R F S S Pick, J. 8 8 8 8 8 4 0 Hr. wage: $11.35 8 + 8 + 8 + 8 + 8 + 4 = 44 hours 11.35(40) = 454.00 11.35(4)(1.5) = 68.10 454.00 + 68.10 = $522.10

  23. EXERCISE SET A 2. Find the gross earnings for the employee. A regular week is 40 hours and the overtime rate is 1.5 times the regular rate. M T W R F S S Mitze, A. 8 8 8 8 8 2 4 Hr. wage: $12.00 8 + 8 + 8 + 8 + 8 + 2 + 4 = 46 hours 12.00(40) = 480 12.00(6)(1.5) = 108 480 + 108 = $588

  24. EXERCISE SET A 3. Varonia Reed is paid a weekly salary of $1,036. What is her annual salary? 1,036(52) = $53,872 Glenda Chaille worked 27 hours in one week at $12.45 per hour. Find her gross earnings. $12.45(27) = $336.15 4.

  25. EXERCISE SET A 5. Ronald James is paid 1.5 times his hourly wage for all hours worked in a week exceeding 40. His hourly pay is $18.55 and he worked 52 hours in a week. Calculate his gross pay. $18.55(40) = $742 $18.55(12)(1.5) = $333.90 $742 + $333.90 = $1,075.90

  26. EXERCISE SET A 6. Patsy Hilliard is paid 5% commission on sales of $18,200. Find her gross pay. $18,200(0.05) = $910 Find the gross earnings if Juanita Wilson earns $275 plus 4% of all sales over $3,000 and the sales for a week are $18,756. 18,756 - 3,000 = 15,756 15,756(0.04) = 630.24 275 + 630.24 = 905.24 7.

  27. Learning Outcomes 10-2 • Find federal tax withholding per paycheck using IRS tax tables. • Find federal tax withholding per paycheck using the IRS percentage method. • Find Social Security and Medicare tax per paycheck. • Find net earnings per paycheck.

  28. Find federal tax withholding perpaycheck using IRS tax tables 10-2-1 Section 10-2 Payroll Deductions • To calculate federal withholding tax using the IRS tax tables, an employer must know: • The employee’s filing status. • Single, married or head of household. • Thenumber of withholding allowancesthe employee claims. • The type of pay period. • The employee’s adjusted gross income.

  29. Income tax Local, state or federal tax paid on one’s income. Federal tax withholding The required amount to be withheld from a person’s pay to be paid to the federal government. Key Terms… Section 10-2 Payroll Deductions

  30. Tax-filing status Status based on whether the employee is married, single, or head of household; determines the tax rate. W-4 form Required form to be held by the employer for determining the amount of federal tax to be withheld. Key Terms… Section 10-2 Payroll Deductions

  31. Allowable adjustments to the gross incomesuch as qualifying IRAs, tax-sheltered annuities, 401Ks, or employee-sponsored childcare or medical plans. Tax-free or tax-deferred benefits? Adjusted gross income Section 10-2 Payroll Deductions

  32. Using the tax tables in your text, findthe amount of tax to be withheld forthe following employees: See pages353 - 354 Examples… Section 10-2 Payroll Deductions • LeShonda, single, paid semimonthly,claiming one allowance, and earning$1,700 per pay period. • $192 • Ricardo, married, paid weekly, claiming 4 allowances and earning $585 per pay period. • $4

  33. Find federal tax withholding per paycheckusing the IRS percentage method 10-2-2 Section 10-2 Payroll Deductions • Instead of using tax tables, many companies calculate federal tax withholding using tax rates. • The employer deducts a tax-exempt amount based on the number of withholding allowances the employee claims. • The resulting amount is called the percentage method income.

  34. Find the withholding taxusing the percentage method Find the exempt-per-allowance amount fromthe withholding allowance table. Identifying the amount exempt for one withholding allowance according to the type of pay period. Multiply the number of withholding allowances claimed by the amount found in the previous step. Subtract the exempt amount from the employee’s adjusted gross income for the pay period. HOW TO: Section 10-2 Payroll Deductions

  35. Dollie Calloway’s biweekly gross earningsare $3,150. She is single, has no adjustments to income and claims two withholding allowanceson her W-4 form. An Example… Section 10-2 Payroll Deductions Find the payroll period usingfig. 10-4, at right, and multiplythe withholding allowanceamount by two. Biweekly: $146.15 x 2 = $292.30

  36. Subtract the exempt amount ($292.30) fromthe adjusted gross income ($3,150.00) andthe result is $2,857.70. See page357 An Example… Section 10-2 Payroll Deductions Dollie Calloway’s biweekly gross earningsare $3,150. She is single, has no adjustments to income and claims two withholding allowanceson her W-4 form. Consult the tax tables shownin figure 10-5 in your text. Table 2 is the appropriate tablefor Dollie’s earnings: single andpaid on a biweekly basis.

  37. Identify the appropriate line where her income falls: “over $1,442 but not over $3,377” The tax is $187.15 plus 25% in excess of $1,442. $2,857.70 (taxable income) - $1,442 = $1415.70 x 25% = $353.93 Add $187.15 + 353.93 = $541.08 The amount of tax to be paid is $541.08. An Example… Section 10-2 Payroll Deductions Dollie Calloway’s biweekly gross earningsare $3,150. She is single, has no adjustments to income and claims two withholding allowanceson her W-4 form.

  38. Find Social Security andMedicare tax per paycheck Find the amount of the earnings subject to be taxed; adjusted gross income less than or equal to $110,100 annually. Social Security taxes are currently capped at $110,100 (this threshold can change). Multiply the taxable amount by 4.2% or 0.042to find the amount in Social Security taxes. 10-2-3 Section 10-2 Payroll Deductions

  39. The Medicare tax amount is calculated at 1.45% (or 0.0145) of the adjusted gross income. Unlike Social Security, there is no cap on income level. Social Security and Medicare tax HOW TO: Section 10-2 Payroll Deductions Example: Joe’s gross pay is $1,654. How much does he owe inSocial Security and Medicare taxes? SS = $69.45 and Medicare = $23.98

  40. Employers also pay 6.2% for Social Securityand 1.45% for Medicare of each employee’sgross pay. A self-employed personmust pay the equivalent of both amounts: 10.4% in Social Security and 2.9% in Medicare. Social Security and Medicare tax Section 10-2 Payroll Deductions

  41. Find the gross pay for the pay period. Find the adjustments to income deductions,such as retirement or insurance. Find the Social Security and Medicare taxbased on the adjusted gross income. Find the Federal withholding tax using oneof the two methods. Tables or percentage. Find net earnings per paycheck 10-2-4 Section 10-2 Payroll Deductions

  42. Find other withholding taxes, such as state tax. Find other deductions such as insurance or union dues. Find the sum of all the deductions and subtract that amount from the gross pay. The resulting amount is the take-home pay. Find net earnings per paycheck 10-2-4 Section 10-2 Payroll Deductions

  43. Beth’s gross weekly earnings are $588. Four percent of her gross earnings is deductedfor her nonexempt retirement fund and$27.48 is deducted for insurance. Find her net earnings if Beth is marriedand claims three withholding allowances. An Example… Section 10-2 Payroll Deductions

  44. Retirement fund = $588 x 0.04 = $23.52 Withholding tax from Figure 10-3 = $11 Social Security = $588 x 0.042 = $24.70 Medicare = $588 x 0.0145 = $8.53 Insurance = $27.48 Total deductions = $95.23 Net earnings = $588 - $95.23 = $492.77 An Example… Section 10-2 Payroll Deductions

  45. EXERCISE SET A 1. Use Figure 10-3 to find the amount of federal tax withholding for the gross earnings of the following married persons who are paid weekly and have the indicated number of withholding allowances. $682, zero allowances Locate 680 in the “At least” column and move across to the column with 0 at the top. Withholding tax is $53.

  46. EXERCISE SET A 2. Use Figures 10-4 and 10-5 , the percentage method tables, to find the amount of federal income tax to be withheld from the gross earnings of married persons who are paid weekly and have earned $2,215, and claim two allowances. 73.08(2) = 146.16 2,215 - 146.16 = 2,068.84 2,068.84 - 1,515 = 553.84 553.84(0.25) = 138.46 Tax = 187.15 + 138.46 = 325.61

  47. EXERCISE SET A 3. Find the employee’s Social Security and Medicare taxes deducted for each pay period. Yearly gross income of $24,000 Social Security = 24,000(0.042) = 1,008 Medicare = 24,000(0.0145) = 348

  48. EXERCISE SET A 4. Find the employee’s Social Security and Medicare taxes deducted for each pay period. Biweekly gross income of $1,426 Social Security = 1,426(0.042) = 59.89 Medicare = 1,426(0.0145) = 20.68

  49. Learning Outcomes 10-3 • Find an employer’s total deposit for withhold tax, Social Security tax, and Medicare tax per pay period. • Find an employer’s SUTA and FUTA tax due for a quarter.

  50. Find Employer’s Total Deposit for Withholding Tax, Social Security Tax and Medicare Tax 10-3-1 Section 10-3 The Employer’s Payroll Taxes • Find the total of withholding taxfor all employees for the pay period. • Find Social Security taxand Medicare taxfor all employees for thee period. • Multiply by twoto include the employer’s portion. • Add the Social Security, Medicare and withholding tax amounts for total amount.

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