1. Chapter Nine PAYROLL Copyright © 2014 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin

2. 9-2 LEARNING UNIT OBJECTIVES LU 9-1: Calculating Various Types of Employees’ Gross Pay 1. Define, compare, and contrast weekly, biweekly, semimonthly, and monthly pay periods. 2. Calculate gross pay with overtime on the basis of time. 3. Calculate gross pay for piecework, differential pay schedule, straight commission with draw, variable commission scale, and salary plus commission. 1. Prepare and explain the parts of a payroll register. 2. Explain and calculate federal and state unemployment taxes. LU 9-2: Computing Payroll Deductions for Employees’ Pay; Employers’ Responsibilities

3. 9-3 PAYROLL CYCLES

4. 9-4 HOURLY RATE OF PAY; CALCULATION OF OVERTIME Gross pay = Hourly overtime pay rate = Earnings for 40 hours + Earnings at time-and-a-half rate Hours employee worked x Rate per hour Regular hourly pay rate x 1.5 Gross pay =

5. 9-5 HOURLY RATE OF PAY; CALCULATION OF OVERTIME EmployeeM T W ThFS Total R Valdez138.510811.2510.7561.5 *Rate is $9.00 per hour. Hourly overtime pay rate = Gross pay = (40 hours x $9) + (21.5 hours x 13.5) $360 + $290.25 = $650.25 61.5 – 40 = 21.5 overtime hours$9 x 1.5 = 13.50 overtime rate Regular hourly pay rate x 1.5 Earnings for 40 hours + Earnings at time-and-a-half rate

6. 9-6 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 = $864.00 Example:

7. 9-7 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: 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 Example:

8. 9-8 STRAIGHT COMMISSION WITH DRAW Commission is a certain percentage of the amount a salesperson sells. Draw is an advance on the salesperson’s commission. 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? ($56,000 x.15) = $8,400 -- 600 $7,800 Example:

9. 9-9 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% Last month, Jane Ring’s net sales were $160,000. What is Jane’s gross pay based on the schedule? ($35,000 x.04) + ($10,000 x.06) + ($115,000 x.08) = $11,200 Example:

10. 9-10 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 Example:

11. 9-11 PAYROLL REGISTER RateBase Social Security6.20%$110,100 Medicare1.45No Base

12. 9-12 FEDERAL INCOME TAX WITHHOLDING (FIT) 1. Percentage Method

13. 9-13 PERCENTAGE METHOD INCOME TAX WITHHOLDING TABLES TABLE 9.1 TABLE 9.2 (Partial) You can use the percentage method to calculate federal income tax withholding (FIT).

14. 9-14 Step 1. In Table 9.1, locate the weekly withholding for one allowance. Multiply this number by 2. PERCENTAGE METHOD Step 2. Subtract Step 1 from employee’s pay. Step 3. In Table 9.2, locate appropriate table and compute income tax. $73.08 x 2 = $146.16 $2,250.00 -- 146.16 $2,103.84 -- 1,515.00 $ 588.84 Tax $187.15 +.25 ($588.81) $187.15 + 147.21 = $334.36 Example: Alice Rey earns $2,250 for week 47. She is married with two allowances.

15. 9-15 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. Assume a company has total wages of $19,000 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.058 = $928; FUTA = $16,000 x.008 = $128 6.2% FUTA 5.4% SUTA credit.8% FUTA tax Example: