Chapter 6 Payroll Section 1 Gross Earnings: Wages and Salaries © 2012 Pearson Education, Inc. All rights reserved

Understand the Methods of Calculating Gross Earnings for Salaries and Wages As shown in the Numbers in the News, on the next slide, many employees live from paycheck to paycheck. Understanding how net pay is calculated can eliminate unwanted surprises. © 2012 Pearson Education, Inc

© 2012 Pearson Education, Inc

Preparing the Payroll Examine time card: – Dates of pay period – Employee’s name – Days, times, hours worked – Total number of hours worked – Signature of employee Transfer information to payroll ledger © 2012 Pearson Education, Inc

Gross Earnings Gross Earnings = Number of hours worked × Rate per hour © 2012 Pearson Education, Inc

Payroll Card © 2012 Pearson Education, Inc

Example 1 Sarah Brynski is doing the payroll for two employees, Nelson and Orr. She must first complete a payroll ledger. © 2012 Pearson Education, Inc

Example 1 - Solution First, find the total number of hours worked by each person. Nelson: = 23 hours Orr: = hours Find Gross Earnings: hours worked × rate © 2012 Pearson Education, Inc

Example 1 - Solution The payroll ledger can now be completed. © 2012 Pearson Education, Inc

Find Overtime Earnings for Over 40 Hours of Work per Week Fair Labor Standards – Establishes a work week of 40 hours – Sets minimum hourly wage – Overtime wage for all hours over 40 hours per workweek – Time-and-a-half rate (1½ or 1.5 times the normal rate © 2012 Pearson Education, Inc

Overtime Gross Earnings Gross Earnings = Earnings at regular rate + Earnings at time- and-a-half rate © 2012 Pearson Education, Inc

Example 2 Complete the following payroll ledger. © 2012 Pearson Education, Inc

Example 2 - Solution First, find the total number of hours worked by each person. Lanier: = Morse: = Find Gross Earnings at regular rate: Lanier: 40 × $8.30 = $332 Morse: 40 × $9.48 = $ © 2012 Pearson Education, Inc

Example 2 - Solution Find overtime hours: Lanier: – 40 = 4.75 overtime hours Morse: – 40 = 6.25 overtime hours Find the time-and-a-half rate: Lanier: 1.5 × $8.30 = $12.45 Morse: 1.5 × $9.48 = $14.22 Find overtime earnings: Lanier: 4.75 h × $12.45 per h = $59.14 Morse: 6.25 h × $14.22 per h = $88.88 © 2012 Pearson Education, Inc

Example 2 - Solution The payroll ledger can now be completed. © 2012 Pearson Education, Inc

Use Overtime Premium Method of Calculating Gross Earnings Straight-time earnings: total hours worked × regular rate + Overtime premium: overtime hours worked × ½ regular rate = Gross Earnings © 2012 Pearson Education, Inc

Example 3 This week, Holly Kelly worked 40 regular hours and 12 overtime hours. Her regular rate of pay is $17.40 per hour. Find her total gross pay, using the overtime premium method. © 2012 Pearson Education, Inc

Example 3 - Solution Kelly’s total hours are = 52, and her overtime premium rate is.5 × $17.40 = $8.70. © 2012 Pearson Education, Inc. Holly Kelly’s gross earnings are $ hours × $17.40 = $ overtime hours × $8.70 = $ $

Find Overtime Earnings for Over 8 Hours of Work per Day Daily Overtime Some companies pay the time-and-a-half rate for all time worked over 8 hours in any one day no matter how many hours are worked in a week. © 2012 Pearson Education, Inc

Understand Double Time, Shift Differentials, and Split-Shift Premiums Other Premium Payment Plans Double Time: for Holidays, and, on some industries, for Saturday and Sundays Shift Differentials: compensate employees for working less-desirable hours Split-Shift Premium: Hours are staggered so on the job during busiest times © 2012 Pearson Education, Inc

Compensatory Time Compensatory Time or Comp Time for overtime hours worked. Instead of additional money, an employee is given time off from the regular work schedule as compensation for overtime hours already worked. Quite often, the compensatory time is calculated at 1½ times the overtime hours worked. © 2012 Pearson Education, Inc

Find Equivalent Earnings for Different Pay Periods The second common method of finding gross earnings uses a salary. A fixed amount given as so much per pay period (time between paychecks). Common pay periods are weekly, biweekly, semimonthly, and monthly. © 2012 Pearson Education, Inc

Example 5 You are a career counselor and want to compare the earnings of four clients you have helped to find jobs. Scott Perrine receives a weekly salary of $546, Tonya McCarley receives a biweekly salary of $1686, Julie Circle receives a semimonthly salary of $736, and Bill Leonard receives a monthly salary of $1818. For each worker, find the following: (a) earnings per year, (b) earnings per month, and (c) earnings per week. © 2012 Pearson Education, Inc

Example 5 - Solution Scott Perine: (a) $546 × 52 = $28,392 per year (b) $28,392 ÷ 12 = $2366 per month (c) $546 per week © 2012 Pearson Education, Inc Tonya McCarley: (a) $1686 × 26 = $43,836 per year (b) $28,392 ÷ 12 = $3653 per month (c) $1686 ÷ 2 = $843 per week

Example 5 - Solution Julie Circle: (a) $736 × 24 = $17,664 per year (b) $736 × 2 = $1472 per month (c) $17,664 ÷ 52 = $ per week © 2012 Pearson Education, Inc Bill Leonard: (a) $1818 × 12 = $21,816 per year (b) $1818 per month (c) $21,816 ÷ 52 = $ per week

© 2012 Pearson Education, Inc

Find Overtime for Salaried Employees Fair Labor Standards Act requires that employees in certain salaried positions receive additional compensation for overtime. Similar to a wage earner, such salaried workers are paid time and a half for all hours worked over 40 hours per week. © 2012 Pearson Education, Inc

Example 6 Monica Gonzales earns $936 a week as an assistant to the vice president of a community bank. A normal workweek for her is 40 hours. Find her gross earnings if she works 45 hours one week and is paid time and a half for everything over 40 hours. © 2012 Pearson Education, Inc

Example 6 - Solution Hourly equivalent to salary = © 2012 Pearson Education, Inc Overtime rate = 1½ × $23.40 = $35.10 Find gross earnings as follows. Regular wages $ Overtime wages 5 × $35.10 = $ Gross Earnings $