1. Chapter 9
Payroll

2. Learning Unit Objectives#9
Payroll
Learning Unit Objectives
Calculating Various Types of Employees’ Gross Pay
LU9.1
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 with draw, variable commission scale and salary plus commission

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

4. Payroll Cycles

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

6. Hourly Rate of Pay; Calculation of Overtime
Employee M T W Th F S Total
R Valdez
Rate is $9.00 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
61.5 – 40 = overtime hours
$9 x 1.5 = overtime rate
(40 hours x $9) + (21.5 hours x 13.5)
$360 + $ = $650.25

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

8. Differential Pay Schedule
Gross pay = Number of units produced x Various rates per unit
Logan Company pays Abby Rogers on the basis of the following schedule:
Units Amount
produced per unit
1-50 $ .50
Over
Last week Abby produced 300 dolls. What is Abby’s gross pay?
(50 x $.50) +(100 x $.62)+(50 x $.75) + (100 x $1.25) = $249.50

9. Straight Commission with Draw
Logan Company pays Jackie Okamoto a straight commission of 15% on her net sales (net sales are total sales less sales returns). In May, Jackie had net sales of $56,000. Logan gave Jackie a $600 draw in May. What is Jackie’s gross pay?
Commission is a certain percentage of the amount a salesperson sells.
Draw is an advance on the salesperson’s commission
($56,000 x .15) = $8,400
-600
$7,800

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

11. Salary Plus Commission
Gross Pay = Salary + Commission
Logan Company pays Joe Roy a $3,000 monthly salary plus a 4% commission for sales over $20,000. Last month Joe’s net sales were $50,000. Calculate Joe’s gross pay.
$3,000 + ($30,000 x .04) = $4,200

12. Payroll Register Rate Base Social Security 6.20% $97,500
Medicare No Base

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

14. Table 9-1,9-2 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)
Partial
(b) MARRIED person -
if the amount of wages
(after subtracting The amount of income tax
withholding allowances) is: to withhold is:
Not over $154 $0
Over -- But not over -- of excess over --
$ $461 10% $154
$ $1,455 $30.70 plus 15% $461
$1, $2,785 $ plus 25% $1,455
$2, $4,165 $ plus 28% $2,785
$4, $7,321 $ plus 33% $4,165
$7,321…… $ plus 35% $7,321

15. Percentage Method
1) Locate one withholding allowance and multiply by the number of allowances employee claims
$70.19 x 2 = $140.38
$2,250.00
$2,109.62
2) Subtract step 1 from employees pay
$2,109.62
-1,455.00 $
Tax $ ($654.62)
$ = $343.46
3) In table 9.2 locate appropriate table and compute income tax

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
6.2% FUTA
5.4% SUTA credit
.8% FUTA tax
*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.
Assume a company has total wages of $20,000 and $4,000 of the wages are exempt from SUTA. What are the company’s SUTA and FUTA taxes if the company’s SUTA rate is 5.8% due to a poor employment record?
$20,000- 4,000 (exempt wages) = $16,000
SUTA = $16,000 x .054 = $928, FUTA = $16,000 x .008 = $128