1. Chapter 6 Payroll Section 2 Gross Earnings: Piecework and Commissions © 2012 Pearson Education, Inc. All rights reserved

2. Find the Gross Earnings for Piecework Time Rates: salaries and wages that depend on actual time on the job Incentive Rates: pay is based on production and actual performance on the job Piecework Rate: pays a given amount per item produced © 2012 Pearson Education, Inc. 6.1- 2

3. Gross Earnings Gross Earnings = Pay per item × Number of items © 2012 Pearson Education, Inc. 6.1- 3

4. Incentive Rates of Pay Piecework rates: 43 cpm © 2012 Pearson Education, Inc. 6.1- 4 Piecework and hourly rates

5. Incentive Rates of Pay Commission Pay © 2012 Pearson Education, Inc. 6.1- 5

6. Incentive Rates of Pay Commission Pay © 2012 Pearson Education, Inc. 6.1- 6

7. Example 1 Stacy Arrington is paid $.73 for sewing a jacket collar, $.86 for a sleeve with cuffs, and $.94 for a lapel. One week she sewed 318 jacket collars, 112 sleeves with cuffs, and 37 lapels. Find her gross earnings. © 2012 Pearson Education, Inc. 6.1- 7

8. Example 1 - Solution Multiply the rate per item by the number of that type of item. © 2012 Pearson Education, Inc. 6.1- 8 Find the gross earnings by adding the three totals from the table. $232.14 + $96.32 + $34.78 = $363.24

9. Determine the Gross Earnings for Differential Piecework Quotas – Certain number that must be met – Premium for each item produced beyond quota Added incentive within an incentive Example: rate paid per item depends on the number of items produced © 2012 Pearson Education, Inc. 6.1- 9

10. Example 2 Suppose Metro Electric pays assemblers as follows: 1–100 units$2.10 each 101–150 units$2.25 each 151 or more units$2.40 each Find the gross earnings of a worker producing 214 units. © 2012 Pearson Education, Inc. 6.1- 10

11. Example 2 - Solution 214 –100100 units at $2.10 each = $210.00 114 – 50 50 units at $2.25 each = $210.00 64 64 units at $2.40 each = $210.00 214 units = $476.10 The gross earnings are $476.10. © 2012 Pearson Education, Inc. 6.1- 11

12. Find the Gross Pay for Piecework with a Guaranteed Hourly Wage Piecework and differential piecework rates are frequently modified to include a guaranteed hourly pay rate. Often necessary to satisfy federal and state laws concerning minimum wages. Employer must pay either the minimum wage or the piecework earnings, whichever is higher. © 2012 Pearson Education, Inc. 6.1- 12

13. Example 3 A tire installer at the Tire Center is paid $10.50 per hour for an 8-hour day or $1.15 per tire installed, whichever is higher. Find the weekly earnings for an employee having the following rate of production. © 2012 Pearson Education, Inc. 6.1- 13

14. Example 3 - Solution Hourly earnings 8-hours: $84 (8 × $10.50). The larger of hourly earnings or the piecework earnings is paid each day. Monday85 × $1.15 = $97.75 Tuesday70 × $1.15 = $84 (hourly) Wednesday88 × $1.15 = $101.20 Thursday68 × $1.15 = $84 (hourly) Friday82 × $1.15 = $94.30 weekly earnings $461.25 © 2012 Pearson Education, Inc. 6.1- 14

15. Calculate the Overtime for Piecework Piecework employees, like other workers, are paid time and a half for overtime. It is common for the overtime rate to be 1½ times the regular rate per piece. © 2012 Pearson Education, Inc. 6.1- 15

16. Example 4 Eugene Smith is paid $.98 per child’s tricycle assembled. During one week, he assembled 480 tricycles on regular time and 104 tricycles during overtime hours. Find his gross earnings for the week if time and a half per assembly is paid for overtime. © 2012 Pearson Education, Inc. 6.1- 16

17. Example 4 - Solution Gross earnings = Earnings at regular piece rate + Earnings at overtime piece rate = 480 × $.98 + 104 × (1.5 × $.98) = $460.40 + $152.88 = $623.28 © 2012 Pearson Education, Inc. 6.1- 17

18. Commission Rate A commission rate pays a salesperson either a fixed percent of sales or a fixed amount per item sold. Commissions are designed to produce maximum output from the salesperson, since pay is directly dependent on sales. © 2012 Pearson Education, Inc. 6.1- 18

19. Find the Gross Earnings Using Commission Rate Times Sales Straight commission: the salesperson is paid a fixed percent of sales. Gross Earnings = Commission rate × Amount of sales Before the commission is calculated, any returns from customers, or any allowances, such as discounts, must be subtracted from sales. © 2012 Pearson Education, Inc. 6.1- 19

20. Example 6 Amanda Roach, a food-supplements sales representative, had sales of $10,230 one month, with returns and allowances of $1120. If her commission rate is 12%, find her gross earnings. © 2012 Pearson Education, Inc. 6.1- 20

21. Example 6 - Solution The returns and allowances must first be subtracted from gross sales. Then multiply the difference, net sales, by the commission rate. Gross earnings = ($10,230 – $1120) × 12% = $9110 ×.12 = $1093.20 © 2012 Pearson Education, Inc. 6.1- 21

22. Determine a Commission Using the Variable Commission Rate Sliding scale or variable commission: method of pay is designed to retain top- producing salespeople © 2012 Pearson Education, Inc. 6.1- 22

23. Example 7 Maureen O’Connor sells food and bakery products to businesses such as Starbucks and is paid as follows based on monthly sales. © 2012 Pearson Education, Inc. 6.1- 23

24. Example 7 - Solution $32,768 – 10,000 $10,000 at 6% = $600.00 $22,768 – 10,000 $10,000 at 8% = $800.00 $12,768 $12,768 at 9% = $1149.12 total commissions: $2549.12 © 2012 Pearson Education, Inc. 6.1- 24

25. Find the Gross Earnings with a Salary Plus Commission Salary plus commission: the salesperson is paid a fixed sum per pay period, plus a commission on all sales. Gross earnings = Fixed amount per pay period + Amount earned on commission Draw: income that is an earning advance (which is a loan against future commissions) © 2012 Pearson Education, Inc. 6.1- 25

26. Example 8 Jaime Bailey is paid $325 per week by Beverly’s Creations, plus 3% on all sales over $500. During one week, her total sales were $2972. Find her gross earnings. © 2012 Pearson Education, Inc. 6.1- 26

27. Example 7 - Solution Gross earnings = Weekly salary + 3% on sales above $500 = $325 +.03($2972 – $500) = $325 + (.03 × $2472) = $325 + $74.16 = $399.16 © 2012 Pearson Education, Inc. 6.1- 27