2. Chapter 9 Payroll McGraw-Hill/Irwin
Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights reserved.

3. 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, variable commission scale and salary plus commission

4. Payroll Cycles

5. Payroll Cycles

6. Payroll Cycles

7. Payroll Cycles

8. Calculate Period Salary Earnings
Annual salary of $55,000. Payroll is semimonthly.
55000 / 24 =
Monthly salary of $4,000. Payroll is bi-weekly.
4000 x 12 / 26 =
Monthly salary of $ Payroll is weekly.
3600 x 12 / 52 =

9. 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

10. Calculate Total Earnings--Hourly
Jessica earns $10.50 per hour. During this weekly pay period she worked 46 hours. What is her gross pay?
10.50 x 40 + (10.50 x 1.5 x 6) = =
Jason earns $13.25 per hour. During this bi-weekly pay period he worked 90 hours. What is his gross pay?
13.25 x 80 + (13.25 x 1.5 x 10) = =

11. Straight Piece Rate Pay; Differential Pay Schedule
Gross pay = Number of units produced x Various rates per unit
Straight Piece Rate Pay
Gross pay = Number of units produced x Rate per unit
Units Amount
produced per unit
1-50 $1.00
Over
Rob produced 225 widgets. He is paid $1.25 per widget. Calculate his gross pay
(50 x $1.00) +(150 x $1.50)+(25 x $1.75) = $318.75
225 x $1.25 = $281.25

12. Calculate Earnings—Piece rate
Bob paints widgets. For each widget he paints during the workday he receives 75 cents. During one week Bob painted 825 widgets. How much did Bob earn?
825 x .75 =
Carol is a widget tester. She is paid according to a schedule (p. 224). During one week, Carol tests 350 widgets. How much did Carol earn?
50 x .50 =
100 x .62 =
50 x .75 =
150 x 1.25 =

13. Straight Commission with Draw
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?
Commission is a certain percentage of the amount a salesperson sells.
Draw is an advance on the salesperson’s commission
($100,000 x .08) = $8,000
-750
$7,250
Commission amount = (Sales x rate) - Draw

14. Calculate Commission with Draw
Marlo is a real estate agent who works on straight commission. During one month, Marlo sold $385,000 of real estate, and received a 2.5% commission. Marlo also receives an expense draw of $250 twice a month. What is the amount of net commissions she will receive.
x .025 = – =

15. Variable Commission Scale
Different commission rates for different levels of net sales
Up to $25, %
Excess of $25,001 to $40, %
Over $40, %
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

16. Calculate Commission—variable scale
Up to $25, %
Excess of $25,001 to $40, %
Over $40, %
Ryan is a widget salesperson. During one month Ryan sold $66,500 of widgets. What is his gross earnings?
$25000 x .05 = $1,250
$15000 x .07 = $1,050
$26500 x .08 = $ 2,120
$66, $4,420

17. 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

18. Work drill problems 9-1 to 9-13, pps. 233-234
Assignment
Review unit 9-1, pps. 221—225
Work drill problems 9-1 to 9-13, pps

19. Review Problem #1
Kelly earns $3000 monthly salary for a 40 hour week. She also gets paid overtime for 12 hours she worked this week. Calculate Kelly’s gross earnings.
3000 * 12 / 52 =
/ 40 = regular rate
17.31 * 1.5 = OT rate
25.97 * 12 = OT earnings =

20. Review Problem 2
Tom earns a monthly salary of $ He is paid bi-weekly, and is entitled to 7 hours Overtime pay this period. Calculate his Gross earnings.
2650 * 12 = / 26 = regular
31800 / 52 / 40 = * 1.5 = OT rate
22.94 * 7 = OT pay =

21. Review Problem #3
Raquel is paid according to a differential pay schedule. During the week, she produces 387 gizmos. Calculate her weekly earnings using the following schedule: Units produced Amount per unit 1—
101—
301—
100 * .75 =
200 * .90 =
87 * 1.25 =

22. 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

23. TYPICAL PAYROLL DEDUCTIONS
FEDERAL
F.I.C.A.--Social Security & Medicare
referred to as OASDI
Old-Age, Survivors, Disability Insurance + Medical Insurance (HI)
Social Security tax rate = 6.2% on employee + employer
SS wage base is $80,400 (2004 actual 87,900)
Medicare tax rate = 1.45 % on all earnings
Federal Income tax
based on amount earned and withholding allowances
State Income Tax
Other voluntary deductions

24. Payroll Register Rate Base Social Security 6.20% $80,400*
Medicare No Base

25. Calculate FICA
Luke has earned a gross wage of $ for the week. He is single and claims one withholding allowance. How much FICA tax will be withheld from his paycheck?
Does Luke exceed the SS wage base?
$650 * 52 = 33,800 –NO, he is under $80,400
SS: 650 x 6.2% = 40.30
Medicare: 650 x 1.45% = 9.43

26. Calculate FICA
Amanda earns a monthly salary of $ She gets paid bi-weekly. How much will be withheld for FICA?
Will Amanda exceed the SS wage base?
2500 x 12 = 30,000 –NO!
2500 x 12 / 26 =
SS = x 6.2% = 71.54
Medicare = x 1.45% = 16.73

27. Calculate FICA
Susan earns a monthly salary of $ How much will be withheld for FICA?
Will Susan exceed the SS wage base?
8000 x 12 = 96,000 –YES!
Some of her earnings will not be taxed.
How much tax in October?
8000 x 10 = 80,000---all taxed
SS = 8000 x 6.2% = 496
Medicare = 8000 x 1.45% = 116

28. Calculate FICA
Susan earns a monthly salary of $ How much will be withheld for FICA in November?
Will Susan exceed the SS wage base? When?
8000 x 12 = 96,000 –YES!
Some of her earnings will not be taxed.
How much tax in November?
8000 x 11 = 88,000 – she goes over
80,400 – previous 80,000 = 400 taxable
SS = 400 x 6.2% = 24.80
Medicare = 8000 x 1.45% = 116

29. Calculate FICA
Susan earns a monthly salary of $ How much will be withheld for FICA in December?
Will Susan exceed the SS wage base?
8000 x 12 = 96,000 –YES!
Some of her earnings will not be taxed.
How much tax in December?
8000 x 11 = 88,000—she went over last month
No more SS tax this year!
SS = 0
Medicare = 8000 x 1.45% = 116

30. Calculate FICA
Thomas receives an annual salary of $100,000. He gets paid semi-monthly. When does he exceed the SS base?
100,000 / 24 = gross per period
80,400 / = 19.29
He will exceed after the 19th period
x 19 =
How much FICA tax will be deducted on the paycheck he receives for the second half of October?

31. Thomas continued Taxable SS = base – ytd earnings
SS tax = * 6.2% = 76.46
Medicare tax = * 1.45% = 60.42

32. Federal Income Tax Withholding (FIT)
1. Wage Bracket Method
handbook p
2. Percentage Method
handbook p. 34

33. Fed. Income Tax Withholding
Tax is determined based on
pay frequency (w, bi, semi, m)
marital status
gross earnings
number of withholding allowances
based on W-4

34. Table 9.1 - Payroll Table (Partial)

35. Calculate FIT
Brent has earned a gross wage of $ for the week. He is married and claims two withholding allowances. How much FIT tax will be withheld from his paycheck using Wage-bracket?
$205

36. 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)
Partial
(b) MARRIED person -
if the amount of wages
(after subtracting The amount of income tax
withholding allowances) is: to withhold is:
Not over $124 $0
Over -- But not over -- of excess over --
$ $960 15% $124
$ $2,023 $ plus 28% $960
$2, $3,292 $ plus 31% $2,023
$3, $5,809 $ plus 36% $3,292
$5,809 $1, plus 39.6% $5,809

37. Percentage Method 2 allowances; $2,000 weekly gross
1) Locate one withholding allowance and multiply by the number of allowances employee claims
$55.77 x 2 = $111.54
$2,000.00
$1,888.46
2) Subtract step 1 from employees pay
$1,888.46 $
Tax $ ($928.46)
$ = $385.37
3) In table 9.2 locate appropriate table and compute income tax

38. Calculate FIT
Brent has earned a gross wage of $ for the week. He is married and claims two withholding allowances. How much FIT tax will be withheld from his paycheck?
Using Wage-bracket
$205
Using Percentage method
Find allowance amount: x 2 =
Taxable amount = 1350 – =
Find bracket: M—$960--$2023
subtract base: – =
calculate: x 28% = 77.97
add base tax: =

39. Calculate FIT
Sue has earned a gross amount of $3150 for the month. She is single and claims one withholding allowance. How much FIT tax will be withheld from her paycheck?
Using Wage-bracket
$467
Using Percentage method
Find allowance amount: x 1 =
Taxable amount = 3150 – =
Find bracket: M—$2392--$5183
subtract base: – =
calculate: x 28% =
add base tax: =

40. Employers’ UnemploymentTaxes
Federal Unemployment Tax Act (FUTA)- 6.2% tax on the first $7,000 paid to employees as wages during the calendar year. Net rate is .8% (.008)
*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

41. Calculate Unemployment Tax
Holly earns a monthly salary of $2,200. If she gets paid semi-monthly, how much FUTA and SUTA must the employer pay the first quarter?
FUTA: x 3 = 6600 x .008 = 52.80
SUTA: x 3 = 6600 x 5.4% =
How much unemployment tax is owed for the 2nd quarter?
Find remaining taxable amount: – 6600 = 400
FUTA: – 6600 = 400 x .008 = 3.20
SUTA: 400 x 5.4% = 21.60

42. Review Problem
John earns $18.50 per hour. During the bi-weekly period he puts in 92 hours. He is married and has three allowances. Calculate gross pay, tax deductions and net pay.
Gross = = 1813
SS tax = 1813 x 6.2% =
Medicare = 1813 x 1.45% = 29.29
FIT allowances= 3 x =
Taxable earnings = 1813 – =
FIT = – 248 = x .15 =
Net pay = 1813 – – – =

43. Review pps. 226--231 Drill problems 14—19, p. 234
ASSIGNMENT
Review pps
Drill problems 14—19, p. 234
Work Word Problems #20--30