Chapter 6 Payroll Section 1 Gross Earnings: Wages and Salaries © 2012 Pearson Education, Inc. All...

Chapter 6Payroll

Section 1

Gross Earnings: Wages and Salaries

© 2012 Pearson Education, Inc.All rights reserved

Understand the Methods of Calculating Gross Earnings for

Salaries and Wages

• As shown in the Numbers in the News, on the next slide, many employees live from paycheck to paycheck.

• Understanding how net pay is calculated can eliminate unwanted surprises.

© 2012 Pearson Education, Inc. 6.1- 2

Preparing the Payroll

• Examine time card:

–Dates of pay period

–Employee’s name

–Days, times, hours worked

–Total number of hours worked

–Signature of employee

• Transfer information to payroll ledger


Gross Earnings

Gross Earnings =

Number of hours worked × Rate per hour


Payroll Card


Example 1

Sarah Brynski is doing the payroll for two employees, Nelson and Orr. She must first complete a payroll ledger.


Example 1 - Solution

First, find the total number of hours worked by each person.Nelson: 2 + 4 + 8 + 6 + 3 = 23 hoursOrr: 3.5 + 3 + 7 + 6.75 + 7 = 27.25 hoursFind Gross Earnings: hours worked × rate


Example 1 - Solution

The payroll ledger can now be completed.


Find Overtime Earnings for Over 40 Hours of Work per Week

• Fair Labor Standards

– Establishes a work week of 40 hours

– Sets minimum hourly wage

– Overtime wage for all hours over 40 hours per workweek

– Time-and-a-half rate (1½ or 1.5 times the normal rate


Overtime Gross Earnings

Gross Earnings =

Earnings at regular rate + Earnings at time-and-a-half rate


Example 2Complete the following payroll ledger.


Example 2 - SolutionFirst, find the total number of hours worked by each person.

Lanier: 6 + 9 + 8.25 + 8 + 9 + 4.5 = 44.75

Morse: 10 + 6.75 + 9 + 6.25 + 10 + 4.25 = 46.25

Find Gross Earnings at regular rate:

Lanier: 40 × $8.30 = $332

Morse: 40 × $9.48 = $379.20© 2012 Pearson Education, Inc. 6.1- 13

Example 2 - SolutionFind overtime hours:Lanier: 44.75 – 40 = 4.75 overtime hoursMorse: 46.25 – 40 = 6.25 overtime hoursFind the time-and-a-half rate:Lanier: 1.5 × $8.30 = $12.45Morse: 1.5 × $9.48 = $14.22Find overtime earnings:Lanier: 4.75 h × $12.45 per h = $59.14Morse: 6.25 h × $14.22 per h = $88.88© 2012 Pearson Education, Inc. 6.1- 14

Example 2 - SolutionThe payroll ledger can now be completed.


Use Overtime Premium Method of Calculating Gross Earnings

Straight-time earnings:

total hours worked × regular rate

+ Overtime premium:

overtime hours worked × ½ regular rate

= Gross Earnings


Example 3This week, Holly Kelly worked 40 regular hours and 12 overtime hours. Her regular rate of pay is $17.40 per hour. Find her total gross pay, using the overtime premium method.


Example 3 - SolutionKelly’s total hours are 40 + 12 = 52, and her overtime premium rate is.5 × $17.40 = $8.70.

© 2012 Pearson Education, Inc.

Holly Kelly’s gross earnings are $1009.20.

6.1- 18

52 hours × $17.40 = $904.8012 overtime hours × $8.70 =

$104.40$1009.20

Find Overtime Earnings for Over8 Hours of Work per Day

Daily Overtime

Some companies pay the time-and-a-half rate for all time worked over 8 hours in any one day no matter how many hours are worked in a week.


Understand Double Time, Shift Differentials, and Split-Shift Premiums

Other Premium Payment Plans

Double Time: for Holidays, and, on some industries, for Saturday and Sundays

Shift Differentials: compensate employees for working less-desirable hours

Split-Shift Premium: Hours are staggered so on the job during busiest times


Compensatory Time

Compensatory Time or Comp Time

for overtime hours worked. Instead of additional money, an employee is given time off from the regular work schedule as compensation for overtime hours already worked. Quite often, the compensatory time is calculated at 1½ times the overtime hours worked.


Find Equivalent Earnings for Different Pay Periods

The second common method of finding gross earnings uses a salary.•A fixed amount given as so much per pay period (time between paychecks). •Common pay periods are weekly, biweekly, semimonthly, and monthly.© 2012 Pearson Education, Inc. 6.1- 22

Example 5You are a career counselor and want to compare the earnings of four clients you have helped to find jobs. Scott Perrine receives a weekly salary of $546, Tonya McCarley receives a biweekly salary of $1686, Julie Circle receives a semimonthly salary of $736, and Bill Leonard receives a monthly salary of $1818. For each worker, find the following: (a) earnings per year, (b) earnings per month, and (c) earnings per week.© 2012 Pearson Education, Inc. 6.1- 23

Example 5 - SolutionScott Perine:

(a) $546 × 52 = $28,392 per year

(b) $28,392 ÷ 12 = $2366 per month

(c) $546 per week


Tonya McCarley:

(a) $1686 × 26 = $43,836 per year

(b) $28,392 ÷ 12 = $3653 per month

(c) $1686 ÷ 2 = $843 per week

Example 5 - SolutionJulie Circle:

(a) $736 × 24 = $17,664 per year

(b) $736 × 2 = $1472 per month

(c) $17,664 ÷ 52 = $339.69 per week


Bill Leonard:

(a) $1818 × 12 = $21,816 per year

(b) $1818 per month

(c) $21,816 ÷ 52 = $419.54 per week

Find Overtime for Salaried Employees

• Fair Labor Standards Act requires that employees in certain salaried positions receive additional compensation for overtime.

• Similar to a wage earner, such salaried workers are paid time and a half for all hours worked over 40 hours per week.


Example 6

Monica Gonzales earns $936 a week as an assistant to the vice president of a community bank. A normal workweek for her is 40 hours. Find her gross earnings if she works 45 hours one week and is paid time and a half for everything over 40 hours.


Example 6 - SolutionHourly equivalent to salary =

© 2012 Pearson Education, Inc.

$936

40 hours$23.40

6.1- 29

Overtime rate = 1½ × $23.40 = $35.10

Find gross earnings as follows.

Regular wages $936.00

Overtime wages 5 × $35.10 = $175.50

Gross Earnings $1111.50

Chapter 6 Payroll Section 1 Gross Earnings: Wages and Salaries © 2012 Pearson Education, Inc. All...

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