McGraw-Hill/Irwin ©2008 The McGraw-Hill Companies, All Rights Reserved Chapter 9 Payroll

9-2 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 Learning Unit Objectives Calculating Various Types of Employees’ Gross Pay LU9.1

9-3 Prepare and explain the parts of a payroll register Explain and calculate federal and state unemployment taxes Payroll #9 Learning Unit Objectives Computing Payroll Deductions for Employees’ Pay; Employers’ Responsibilities LU9.2

9-4 Payroll Cycles

9-5 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

9-6 Hourly Rate of Pay; Calculation of Overtime EmployeeMTWThFSTotal R Valdez Hourly overtime pay rate = Regular hourly pay rate x 1.5 Gross pay = Earnings for 40 hours + Earnings at time-and-a-half rate (40 hours x $9) + (21.5 hours x 13.5) $360 + $ = $ – 40 = 21.5 overtime hours$9 x 1.5 = overtime rate

9-7 Straight Piece Rate Pay Gross pay = Number of units produced x Rate per unit Rob produced 900 dolls. He is paid $.96 per doll. Calculate his gross pay 900 x $.96 = $864

9-8 Differential Pay Schedule Gross pay = Number of units produced x Various rates per unit UnitsAmount produced per unit 1-50$ Over (50 x $.50) +(100 x $.62)+(50 x $.75) + (100 x $1.25) = $249.50

9-9 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 15%. His computer net sales were $56,000. Larry’s draw was $600. What is his gross pay? ($560,000 x.15) = $8, $7,800

9-10 Variable Commission Scale Different commission rates for different levels of net sales Up to $35,000 4% Excess of $35,000 to $45,000 6% Over $45,000 8% Juanita’s net sales were $160,000. What is her gross pay based on the schedule? ($35,000 x.04) + ($10,000 x.06) + ($115,000 x.08) = $11,200

9-11 Salary Plus Commission Gross Pay = Salary + Commission Chung receives a salary of $3,000 per month. He also receives a 4% commission for sales over $20,000. Last month’s sales were $50,000. Calculate Chung’s gross pay. $3,000 + ($30,000 x.04) = $4,200

9-12 Payroll Register RateBase Social Security6.20%$97,500 Medicare1.45No Base

9-13 Federal Income Tax Withholding (FIT) 1. Percentage Method

9-14 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) (b) MARRIED person - if the amount of wages (after subtractingThe amount of income tax withholding allowances) is:to withhold is: Not over $154$0 Over --But not over --of excess over -- $154 $44910% $154 $449 $1,360$29.50 plus 15% $449 $1,360 $2,573$ plus 25%$1,360 $2,573 $3,907$ plus 28%$2,573 $3,907 $6,865$ plus 33%$3,907 $6,865……$ plus 35% $6,865 Partial

9-15 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 $65.38 x 2 = $ $2, $2, , $ Tax $ ($759.24) $ = $355.96

9-16 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 6.2% FUTA 5.4% SUTA credit.8% FUTA tax

9-17 Problem 9-24: Solution: $40,000 x.03 = $1,200 45,000 x.04 = 1,800 2,000 x.06 = 120 $3,120

9-18 Problem 9-26: Solution: Social Security: $2,100 x.062 = $ Medicare: $2,100 x.0145 = $30.45 Yes for Social Security: 52 weeks x $2,100 = $109, ,500 $ 11,700 exempt

9-19 Problem 9-27: Solution: Social Security: $1,000 x.062 = $62 Medicare: $1,300 x.0145 = $30.45 FIT: $1, ($65.38 x 2) $1, $ ($720.24) $ $ $ = $137.54

9-20 Problem 9-30: Solution: 11 x $400 = $ 4, x $500 = 5, x $700 = 7,700 17, $16,900 State: $16,900 x.056 = $ Federal: $16,900 x.008 = $ $0 for week 30