9-1

9-2

Chapter 9Chapter 9

PayrollPayroll

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

9-3

• 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

Payroll#9#9Learning Unit ObjectivesCalculating Various Types of Employees’ Gross Pay

LU9.1LU9.1

9-4

• Prepare and explain the parts of a payroll register

• Explain and calculate federal and state unemployment taxes

Payroll#9#9Learning Unit ObjectivesComputing Payroll Deductions for Employees’ Pay; Employers’ Responsibilities

LU9.2LU9.2

9-5

Payroll Cycles

Salary Paid Period (based on a year)

Weekly 52 times (once a week) $769.23 ($40,000/52)

Biweekly 26 times (every two weeks)$1,538.46 ($40,000/26)

Semimonthly 24 times (twice a month) $1,666.67 ($40,000/24)

Monthly 12 times (once a month) $3,333.33 ($40,000/12)

Earning per period

9-6

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

9-7

Straight Piece Rate Pay; Differential Pay Schedule

Straight Piece Rate Pay

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 Amountproduced per unit1-50 $1.0051-200 1.50Over 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

9-8

Straight Commission with Draw

Commission is a certain percentage of the amount a

salesperson sells.

Draw is an advance on the salesperson’s commission

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?

($100,000 x .08) = $8,000

-750 $7,250

9-9

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

9-10

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

9-11

Payroll Register

Week #41

Allowance& Salary

Employee marital Cum. per Cum. Health NetName status earnings week Reg. Ovt. Gross earnings S.S. Med. S.S. Med. FIT SIT Ins. Pay

Rey, Allice M-2 86,000 2,000 2,000 - 2,000 88,000 1,900 2,000 117.8 29 308.8 120 100 1,324.36A B C D E F G H I J K L M

GLO COMPANYPayroll Register

Earnings Taxable Earnings FICA

FICADeductions

Rate Base

Social Security 6.20% $87,900

Medicare 1.45 No Base

9-12

Federal Income Tax Withholding (FIT)

1. Percentage Method

9-13

Table 9-3,9-4 Percentage method income tax withholding tables

OneWithholding

Payroll Period AllowanceWeekly $ 59.62Bi weekly 119.23Semimonthly 129.17Monthly 258.33Quarterly 775.00SemiAnnually 1550.00Daily or miscellaneous (each 11.92day of the payroll period)

(b) MARRIED person -if the amount of wages(after subtracting The amount of income taxwithholding allowances) is: to withhold is:Not over $124 $0Over -- 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

Partial

9-14

Percentage Method

1) Locate one withholding allowance and multiply by the number of allowances employee claims

2) Subtract step 1 from employees pay

3) In table 9.2 locate appropriate table and compute income tax

$55.62 x 2 = $119.24

$2,000.00 - 119.24$1,880.76

$1,880.76 -1,245.00$ 635.76

Tax $149.90 + .25 ($635.76) $149.90 + 158.94 = $308.84

9-15

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