Business

Mathematics

PAYROLL

10.1 Gross Pay

Find the gross pay per paycheck based on
salary.
Find the gross pay per weekly paycheck
based on hourly wage.
Find the gross pay per paycheck based on
piecework wage.
Find the gross pay per paycheck based on
commission.

10.1.3 Find the Gross Pay

Per Paycheck Based on Salary
Pay periods
Weekly: once a week or 52 times a year.
Biweekly: every two weeks or 26 times a
year.
Semimonthly: twice a month or 24 times a
year.
Monthly: once a month or 12 times a year.

Find the gross

earnings per pay
period
Nicole earns $36,000 a year. If she is paid on
a weekly basis, what is her gross pay per
week?
Divide $36,000 by 52 pay periods.
$692.31
What if she is paid on a semimonthly basis?
$1,500.00

Try these examples

Find the gross earnings for:
Carolyn, who earns $15,000 a year and is paid
weekly.
$288.46
Martha, who earns $48,000 a year and is paid
biweekly.
$1,846.15
Bill, who earns $35,000 a year and is paid
semimonthly.
$1,458.33

Key Terms
Gross earnings (gross pay): the
amount earned before deductions.
Net earnings (net pay/take-home pay):
the amount of your paycheck.

Key Terms
Hourly rate or hourly wage: the
amount of pay per hour worked based on
a standard 40 hour work week.
Overtime rate: rate of pay for hours
worked that exceed 40 hours per week.
Time and a half: standard overtime rate
that is 1 (or 1.5) times an hourly rate.

Key Terms
Regular pay: earnings based on an
hourly rate of pay.
Overtime pay: earnings based on
overtime rate of pay.

10.1.2 Find the Gross Pay Per

Week Based on Hourly Wages
1. Find the regular pay by multiplying the
number of hours (40 or less) by the
hourly wage.
2. Find the overtime pay by multiplying
the hourly rate by the overtime rate
(usually 1.5) and then multiply that rate
by the number of hours that exceed 40.
3. Add the figures from steps 1 and 2.

Heres an example
Theresa worked 45 hours last week. If her hourly
rate is $10.50 per hour, find her total gross
earnings.
Multiply 40 x $10.50 = $420.00
To calculate the overtime amount, multiply her
hourly rate by 1.5: $10.50 x 1.5 = $15.75
Multiply the overtime rate ($15.75) x the number
of overtime hours (5): $15.75 x 5 = $78.75
Add the regular and overtime pay: $498.75

Try these examples

The regular hourly rate in the production department
for these employees is $6.50, and overtime is paid
at 1.5.
Find the weekly earnings for these employees:
Marcus worked 48 hours.
$338
Allison worked 44 hours.
$299

10.1.3 Find the Gross Pay Per

Paycheck Based on Piecework
Piecework rate: amount of pay for each
acceptable item produced.
Straight piecework rate: piecework rate
where the pay per piece is the same no
matter how many items are produced.
Differential piece rate (escalating piece
rate): piecework rate that increases as more
items are produced.

Heres an example
Jorge assembles microchip boards. He is
paid on a differential piecework basis.
Rates are as follows:
From 1-100 $1.32 per board
From 101-300

$1.42 per board

301 and over

$1.58 per board

If he assembles 317 boards how much will he

earn?

Jorges earnings
100 x $1.32 =

$132.00

101 to 300 = 200 x $1.42=

$284.00

17 x $1.58 =

$ 26.86

Total earnings:

$442.86

Try this example

Jillian gets paid a differential piece rate for
each shirt she sews. Consult the chart below
and calculate her weekly earnings if she sewed
352 shirts last week.
From 1-100:

$0.47 each

From 101-300:$0.60 each

301 and above:

$0.70 each

What were her earnings?

$203.40

10.1.4 Find the Gross Pay Per

Paycheck Based on
Commission
Commission: earnings based on sales.
Straight commission: entire pay based on sales.
Salary plus commission: a set amount of pay
plus an additional amount based on sales.
Commission rate: percent of sales that are eligible
for a commission.
Quota: a minimum amount of sales that is required
before a commission is applicable.

Heres an example
Marisa is a restaurant supplies salesperson and
receives 6% of her total sales as commission.
Her sales totaled $12,000 during a given week.
Find her gross earnings.
Use the formula: P = R x B to find her earnings.
P = 0.06 x $12,000 = $720
Marisas earnings equal $720

Try this example

Melanie Brooks works for a cosmetics
company and earns $200 a week in salary
plus 30% commission on all sales over $500.
If she had sales of $1,250 last week, how
much were her total earnings?
Her salary would be $200 plus any applicable
commission.
The commission would be calculated at 30%
on $750 in sales or $225. Add this amount to
her base salary and the total is $425.

10.2 Payroll
Deductions
Find federal tax withholding per paycheck
using FBR tax tables.
Find federal tax withholding per paycheck
using the FBR percentage method.
Find Social Security and Medicare tax per
paycheck.
Find net earnings per paycheck.

Key Terms
Income tax: local, state of federal tax paid
on ones income.
Federal tax withholding: the required
amount to be withheld from a persons pay to
be paid to the federal government.
Tax-filing status: status based on whether
the employee is married, single, or head of
household; determines the tax rate.
W-4 form: required form to be held by the
employer for determining the amount of
federal tax to be withheld.

10.2.1 Find Federal Tax

Withholding per Paycheck Using
IRS Tax Tables
To calculate federal withholding tax using the IRS
tax tables, an employer must know:
The employees filing status (single, married
or head of household)
The number of withholding allowances the
employee claims
The type of pay period
The employees adjusted gross income

Adjusted gross income

Allowable adjustments to the gross
income, such as qualifying IRAs, taxsheltered annuities, 401Ks, or employeesponsored childcare or medical plans.

Tax-free or tax-deferred
benefits

Find the withholding

tax

Using the tax tables in your text, find the amount

of tax to be withheld for the following employees:
LeShonda, single, paid semimonthly, claiming one
allowance, and earning $1,700 per pay period.
$220
Ricardo, married, paid weekly, claiming 4
allowances and earning $585 per pay period.
$17

10.2.2 Find Federal Tax Withholding per

Paycheck Using the IRS Percentage
Method
Instead of using tax tables, many companies
calculate federal tax withholding using tax rates.
In order to use tax rates, the employer must
deduct from the employees adjusted gross
income a tax-exempt amount based on the
number of withholding allowances the
employee claims.
The resulting amount is called the percentage
method income.

How to find the withholding

tax using the percentage
method
Find the exempt-per-allowance amount from the
withholding allowance table, identifying the amount
exempt for one withholding allowance according to
the type of pay period.
Multiply the number of withholding allowances
claimed by the amount found in the previous step.
Subtract the exempt amount from the employees
adjusted gross income for the pay period.

Calculate the amount

Dollie Calloways biweekly gross
earnings are $3,150. She is single, has
no adjustments to income and claims two
withholding allowances on her W-4
form.
Find the payroll period using figure 10-4 in
your text and multiply the withholding
allowance amount by two.
Biweekly: $130.77 x 2 = $261.54

Continue with the following

steps
Subtract the exempt amount ($261.54) from
the adjusted gross income ($3,150.00) and
the result is $2,888.46.
Consult the tax tables shown in Figure 10-5
in your text.
Table 2a is the appropriate table for Dollies
earnings: single and paid on a biweekly
basis.

Continue
Identify the appropriate line where her income
falls: over $1,289 but less than $2,964
The tax is $163.70 plus 25% in excess of $1,289.
$ 2,888.46 (taxable income) - $1,289 =
$1599.46 x 25% = $399.87
Add $399.87 + 163.70 = $563.57
The amount of tax to be paid is $563.57.

10.2.3 Find Social Security

and Medicare Tax per
Paycheck
Find the amount of the earnings subject to be
taxed; adjusted gross income less than or
equal to $97,500 annually.
Social Security taxes are currently capped at
$97,500. (This threshold can change.)
Multiply the taxable amount by 6.2% or 0.062
to find the amount in Social Security taxes.

Find the Medicare tax

amount
The Medicare tax amount is calculated at
1.45% (or 0.0145) of the adjusted gross
income.
Unlike Social Security, there is no cap on
income level.
Example: Joes gross pay is $1,654. How
much does he owe in Social Security and
Medicare taxes?
SS = $102.55 and Medicare = $23.98

Employers pay an equal

amount
Employers also pay 6.2% for Social
Security and 1.45% for Medicare of each
employees gross pay.
A self-employed person must pay the
equivalent of both amounts: 12.4% in
Social Security and 2.9% in Medicare.

10.2.4 Find the Net

Earnings per Paycheck
Find the gross pay for the pay period.
Find the adjustments to income deductions,
such as retirement or insurance.
Find the Social Security and Medicare tax
based on the adjusted gross income.
(continue on next slide)

Find the net earnings

Find the Federal withholding tax using one of
the two methods. (tables or percentage)
Find other withholding taxes, such as state tax.
Find other deductions such as insurance or
union dues.
Find the sum of all the deductions and subtract
that amount from the gross pay.
The resulting amount is the take-home pay.

Try this example

Beths gross weekly earnings are $588. Four
percent of her gross earnings is deducted for
her nonexempt retirement fund and $27.48
is deducted for insurance.
Find her net earnings if Beth is married and
claims three withholding allowances.
See next slide for individual calculations.

Beths take-home pay

Retirement fund = $588 x .04 =

$23.52

Withholding tax from Figure 10-3 = $24

Social Security = $588 x 0.062 = $36.46
Medicare = $588 x 0.0145 = $8.53
Insurance = $27.48
Total deductions = $119.99
Net earnings = $588 - $119.99 = $468.01

10.3 The Employers Payroll Taxes

Find an employers total deposit for
withholding tax, Social Security tax and
Medicare tax per pay period.
Find an employers SUTA and FUTA tax
due for a quarter.

10.3.1 Find the Employers

Total Deposit for Withholding Tax,
Social Security Tax and Medicare Tax
Find the total of withholding tax for all employees for
the pay period.
Find the Social Security tax for all employees for the
period and multiply by two to include the employers
portion.
Find the Medicare tax for all employees for the period
and multiply by two to include the employers portion.
Add the Social Security, Medicare and withholding tax
amounts for total amount.

Find the employers total

deposit
Employee

Gross
Withholding Social
Earnings
Security

Medicare

Net
Earnings

Plumlee

$1,050

$57.73

$65.10

$15.23

$911.94

Powell

2,085

168.05

129.27

30.23

1,757.45

Randle

1,995

174.80

123.69

28.93

1,667.58

Robinson 2,089

350.45

129.52

30.29

1,578.74

Find the employers

deposit
Employees
Contribution

Employers
Contribution

Total

Social
Security

$447.58

$447.58

$895.16

Medicare

$104.68

$104.68

$209.36

Withholding

$751.03

$751.03

Total Employer Deposit

$1,855.55