2. Basic Goals of Payroll System  Prepare and issue payroll checks  Produce records for accounting purposes and reporting to government and management.  Prepare and issue payroll checks  Produce records for accounting purposes and reporting to government and management.

3.  The payroll is a list of the employees and the payments due to each employee for a specific pay period.  A pay period is the amount of time over which an employee is paid.  Examples:  Weekly – 52 pay periods per year  Bi-weekly – every other week; 26 pay periods per year  Semi-monthly – twice a month; 24 pay periods per year  Monthly – 12 pay periods per year  The payroll is a list of the employees and the payments due to each employee for a specific pay period.  A pay period is the amount of time over which an employee is paid.  Examples:  Weekly – 52 pay periods per year  Bi-weekly – every other week; 26 pay periods per year  Semi-monthly – twice a month; 24 pay periods per year  Monthly – 12 pay periods per year

4. Computing Gross Earnings/Pay The total amount of money an employee earns in a pay period is gross earnings, or gross pay. An employee’s pay can be based on: The total amount of money an employee earns in a pay period is gross earnings, or gross pay. An employee’s pay can be based on:  Hourly wage  Overtime pay  Piece rate  Salary  Commission  Salary plus commission  Hourly wage  Overtime pay  Piece rate  Salary  Commission  Salary plus commission

5. Hourly Wage  Amount of money paid to an employee per hour worked  Time card completed to keep track of hours  Most companies round arrival and departure to nearest quarter hour  Electronic badge readers to record time  The number of hours worked multiplied by the hourly wage equals the gross earnings for the pay period. http://www.dol.gov/esa/minwage/america.htm  Amount of money paid to an employee per hour worked  Time card completed to keep track of hours  Most companies round arrival and departure to nearest quarter hour  Electronic badge readers to record time  The number of hours worked multiplied by the hourly wage equals the gross earnings for the pay period. http://www.dol.gov/esa/minwage/america.htm

6. Overtime Pay  Amount paid for hours worked over 40 per week  Calculated at 1 and ½ times the regular wage  Set by the Fair Labor Standards Act of 1938  Multiply the hourly wage by 1.5 to calculate the overtime hourly wage.  Multiply the overtime hourly wage by the hours worked over 40 per week to calculate the overtime pay  Amount paid for hours worked over 40 per week  Calculated at 1 and ½ times the regular wage  Set by the Fair Labor Standards Act of 1938  Multiply the hourly wage by 1.5 to calculate the overtime hourly wage.  Multiply the overtime hourly wage by the hours worked over 40 per week to calculate the overtime pay

7. Piece Rate  A fixed amount paid for each piece produced or assembled  The number of pieces produced or assembled multiplied by the piece rate equals the gross earnings for the pay period.  A fixed amount paid for each piece produced or assembled  The number of pieces produced or assembled multiplied by the piece rate equals the gross earnings for the pay period.

8. Salary  A fixed amount of money paid to an employee for each pay period.  An employee who is paid a salary earns the same amount regardless of the number of hours worked during the pay period.  A fixed amount of money paid to an employee for each pay period.  An employee who is paid a salary earns the same amount regardless of the number of hours worked during the pay period.

9. Commission  An amount paid to an employee based on a percentage of the employee’s sales.  The amount of the employee’s sales multiplied by the commission percentage equals the gross earnings for the pay period.  An amount paid to an employee based on a percentage of the employee’s sales.  The amount of the employee’s sales multiplied by the commission percentage equals the gross earnings for the pay period.

10. Salary plus Commission  An amount paid based on a salary and a commission (percentage of an employee’s sales)  To calculate gross earnings, you would calculate the commission and add it to the salary.  An amount paid based on a salary and a commission (percentage of an employee’s sales)  To calculate gross earnings, you would calculate the commission and add it to the salary.

11. Deductions  An amount that is subtracted from gross earnings is called a deduction.  Deductions include those required by law (mandatory) and those an employee wishes to have withheld from earnings (voluntary).  Employer is like a collection agency for deductions; they become liabilities until they are submitted.  The employer sends the monies withheld to the correct entity monthly, quarterly, annually depending on size of business’ payroll or agreement with provider  An amount that is subtracted from gross earnings is called a deduction.  Deductions include those required by law (mandatory) and those an employee wishes to have withheld from earnings (voluntary).  Employer is like a collection agency for deductions; they become liabilities until they are submitted.  The employer sends the monies withheld to the correct entity monthly, quarterly, annually depending on size of business’ payroll or agreement with provider

12. Mandatory Deductions  Federal Income Tax  Social Security Tax  State and Local Income Taxes  Federal Income Tax  Social Security Tax  State and Local Income Taxes

13. Federal Income Tax  the employee’s marital status  the number of allowances claimed by the employee on his W-4 Employees Withholding Allowance Certificate  the employee’s gross earnings The amount is calculated using tax tables prepared by the IRS; updated annually.tax tables  the employee’s marital status  the number of allowances claimed by the employee on his W-4 Employees Withholding Allowance Certificate  the employee’s gross earnings The amount is calculated using tax tables prepared by the IRS; updated annually.tax tables The amount withheld for federal income taxes depends on three factors:

14. W-4

15.  Established in 1935 – Federal Insurance Contributions Act (FICA)  This is an exact tax calculated at a certain percentage of gross earnings.  Established in 1935 – Federal Insurance Contributions Act (FICA)  This is an exact tax calculated at a certain percentage of gross earnings. FICA Taxes

16. Two categories:  Social Security Tax  deducted until the maximum taxable earnings is reached  6.2% of gross earnings  provides retirement & disability and survivor’s benefits  Medicare Tax  deducted on all gross earnings  1.45% of gross earnings  provides health benefits upon retirement Two categories:  Social Security Tax  deducted until the maximum taxable earnings is reached  6.2% of gross earnings  provides retirement & disability and survivor’s benefits  Medicare Tax  deducted on all gross earnings  1.45% of gross earnings  provides health benefits upon retirement FICA TAxes

17. State and Local Income Taxes  In some states and cities, the tax rates are set as a percentage of gross earnings.  In others, the amounts to be deducted are indicated on tables similar to the ones used for federal income tax.  In some states and cities, the tax rates are set as a percentage of gross earnings.  In others, the amounts to be deducted are indicated on tables similar to the ones used for federal income tax.

18. Common voluntary deductions include:  union dues  health insurance payments  life insurance payments  pension and other retirement contributions  credit union deposits and payments  U.S. savings bonds  charitable contributions  401(k) plan (before)  union dues  health insurance payments  life insurance payments  pension and other retirement contributions  credit union deposits and payments  U.S. savings bonds  charitable contributions  401(k) plan (before) Voluntary Deductions