Payroll

1. Payroll Kirkwood Community College March 2, 2009 Presented by Sanh Tran, MBA, CPIM, CTL

2. Chapter 9 Payroll

3. #9 Payroll Learning Unit Objectives Calculating Various Types of Employees’ Gross Pay LU9.1 • Define, compare, and contrast weekly, biweekly, semimonthly, and monthly pay periods • Calculate gross pay with overtime on the basis of time • Calculate gross pay for piecework, differential pay schedule, straight commission, variable commission scale and salary plus commission

4. #9 Payroll Learning Unit Objectives Computing Payroll Deductions for Employees’ Pay; Employers’ Responsibilities LU9.2 • Prepare and explain the parts of a payroll register • Explain and calculate federal and state unemployment taxes

5. Payroll Cycles

6. Hourly Rate of Pay; Calculation of Overtime Gross pay = Hours Employee worked x Rate per hour Hourly overtime pay rate = Regular hourly pay rate x 1.5 Gross pay = Earnings for 40 hours + Earnings at time-and-a-half rate

7. Hourly Rate of Pay; Calculation of Overtime Employee M T W Th F S Total R Valdez 13 8.5 10 8 11.25 10.75 61.5 Hourly overtime pay rate = Regular hourly pay rate x 1.5 Gross pay = Earnings for 40 hours + Earnings at time-and-a-half rate 61.5 – 40 = 21.5 overtime hours $9 x 1.5 = 13.50 overtime rate (40 hours x $9) + (21.5 hours x 13.5) $360 + $290.25 = $650.25

8. Straight Piece Rate Pay Straight Piece Rate Pay Gross pay = Number of units produced x Rate per unit Rob produced 900 dolls. He is paid $.96 per doll. Calculate his gross pay 900 x $.96 = $864

9. Differential Pay Schedule John worked and produced 300 pieces last week. His wages would b e paid per differential pay schedule. Differential Pay Schedule Gross pay = Number of units produced x Various rates per unit Units Amount produced per unit 1-50 $ .50 51-150 .62 151-200 .75 Over 200 1.25 (50 x $.50) +(100 x $.62)+(50 x $.75) + (100 x $1.25) = $249.50

10. Commission Commission is a certain percentage of the sales amount that a salesperson will get paid based on the net sales he or she has made. Draw is the advance amount that a salesperson gets from his or her commission. The draw should be deducted from the total commission before the salesperson gets his or her final pay for the pay period.

11. Straight Commission with Draw Larry is paid a straight commission of 15%. His computer net sales were $56,000. Larry’s draw was $600. What is his gross pay? Commission is a certain percentage of the amount a salesperson sells. $56,000 is net sales. Draw is an advance on the salesperson’s commission. Draw is $600 in this case. ($56,000 x 0.15) = $8,400 -600 Gross pay $7,800

12. 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% Juanita’s net sales were $160,000. What is her gross pay based on the schedule? Net sales divided into 3 levels: $160,000 = 35,000 + 10,000 + 115,000 ($35,000 x .04) + ($10,000 x .06) + ($115,000 x .08) = $11,200

13. Salary Plus Commission Gross Pay = Salary + Commission Chung receives a salary of $3,000 per month. He also receives a 4% commission for sales over $20,000. Last month’s sales were $50,000. Calculate Chung’s gross pay. Sales amount over $20,000 with commission: $50,000 – 20,000 = $30,000 This amount would apply 4% commission. $3,000 + ($30,000 x .04) = $4,200

14. Payroll Register Rate Base Social Security 6.20% $97,500 Medicare 1.45 No Base

15. Federal Income Tax Withholding (FIT) 1. Percentage Method

16. Table 9-3,9-4 Percentage method income tax withholding tables One Withholding Payroll Period Allowance Weekly $ 65.38 Bi weekly 130.77 Semimonthly 141.67 Monthly 283.33 Quarterly 850.00 SemiAnnually 1700.00 Daily or miscellaneous (each 13.08 day of the payroll period) Partial (b) MARRIED person - if the amount of wages (after subtracting The amount of income tax withholding allowances) is: to withhold is: Not over $154 $0 Over -- But not over -- of excess over -- $154 $449 10% $154 $449 $1,360 $29.50 plus 15% $449 $1,360 $2,573 $166.15 plus 25% $1,360 $2,573 $3,907 $469.40 plus 28% $2,573 $3,907 $6,865 $842.92 plus 33% $3,907 $6,865…… $1819.06 plus 35% $6,865

17. Percentage Method 1) Locate one withholding allowance and multiply by the number of allowances employee claims $65.38 x 2 = $130.76 $2,250.00 - 130.76 $2,119.24 2) Subtract step 1 from employees pay $2,119.24 -1,360.00 $ 759.24 Tax $166.15 + .25 ($759.24) $166.15 + 189.81 = $355.96 3) In table 9.2 locate appropriate table and compute income tax

18. 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. 6.2% FUTA 5.4% SUTA credit .8% FUTA tax Employee earns $9,000 in the first quarter. How much does the employer pay in FUTA & SUTA? SUTA = $7,000 x .054 = $378, FUTA = $7,000 x .008 = $56

19. Homework 9-28 and 9-29

20. Summary Practice Test: No. 3 Solution: Sales amount is $230,000 $230,000 = 40,000 + 40,000 + 150,000 $40,000 x 0.06 = $2,400 40,000 x 0.07 = 2,800 150,000 x 0.13 = 19,500 ------------------- $24,700

21. Problem 9-26: Solution: Social Security: $2,100 x .062 = $130.20 Medicare: $2,100 x .0145 = $30.45 Yes for Social Security: 52 weeks x $2,100 = $109,200 - 97,500 $ 11,700 exempt

22. Problem 9-27: Solution: Social Security: $1,000 x .062 = $62 Medicare: $1,300 x 0.0145 = $18.85 FIT: $1,300.00 - 130.76 ($65.38 x 2) $1,169.24 Base FIT + Additional FIT - 449.00 $29.50 + (0.15) ($720.24) $ 720.24 $29.50 + $108.04 = $137.54 2 is the exemption. $65.38 per exemption.

23. Problem 9-30: Solution: State: $16,900 x .056 = $946.40 Federal: $16,900 x .008 = $135.20 $0 for week 30 (At week 30, all 3 employees had over $7,000 in wages in the year). 11 x $400 = $ 4,400 11 x $500 = 5,500 11 x $700 = 7,700 17,600 - 700 $16,900 For the 3rd employee, the employer needs to pay up to the first $7,000. Hence, $700 should be deducted from the total $17,600.