MANAGING YOUR PERSONAL FINANCES UNIT 2 CALCULATING GROSS

MANAGING YOUR PERSONAL FINANCES UNIT 2: CALCULATING GROSS PAY, DEDUCTIONS AND NET PAY

DO NOW: Is the amount you make as salary the same as the amount you take home? If not, why not?

UNIT STANDARD Standard 2. 5: Distinguish between and calculate gross pay, standard deductions and gross pay. Students will be able to identify mandatory and voluntary payroll deductions. Students will be able to calculate net pay.

DAILY GOALS I will be able to calculate Gross Pay. I will be able to identify mandatory and voluntary Payroll Deductions.

DEFINITIONS… Gross Pay is the total amount due to an employee for a pay period. (It would include regular, overtime, holiday, vacation and sick pay, as well as any commissions, tips or bonuses. )

WHAT DO YOU NEED TO KNOW TO FIGURE OUT WHAT YOUR EARNINGS SHOULD BE?

BASIC GROSS PAY FORMULA: (FOR HOURLY EMPLOYEES) Gross Pay = Hours (Worked) x Hourly Rate G=H*R

BASIC GROSS PAY FORMULA: (FOR HOURLY EMPLOYEES) Example: What would be the Gross Pay for Mary who worked 20 hours and got paid $8. 25 (minimum wage)? Gross Pay = Work Hours x Wage

BASIC GROSS PAY FORMULA: (FOR HOURLY EMPLOYEES) Practice: What would be the Gross Pay for John who worked 25 hours and got paid $8. 25 (minimum wage)? Gross Pay = Work Hours x Wage

A WORD ABOUT MINIMUM WAGE Federal Labor Standards Act 1938– 2014 1938 - 25¢ / hour 1939 - 30 ¢ / hour 1956 $1. 00 / hour 1974 $2. 00 / hour 1980 $3. 10 / hour 1991 $4. 25 / hour n n n 1997 $5. 15 / hour 2007 $5. 85 / hour 2008 $6. 55 / hour 2009 $7. 25 / hour 2014 $8. 25 / hour

BASIC GROSS PAY FORMULA: (FOR HOURLY EMPLOYEES) One More Practice: May’s Gross Pay was $42. 50 after working 10 hours (she earned minimum wage. ) Based on the Minimum Wage chart, what was the year and what was the minimum wage for that year?

OTHER GROSS PAY FORMULAS Gross Pay: Hourly rate x number of hrs worked Overtime: 1 ½ times hourly rate x number of hours worked Holiday: 1 ½ or 2 times hourly rate x number of hours worked Tips: usually 15 – 20% of bill Commission: percentage or fixed amount per item sold

CALCULATE GROSS PAY (FOR HOURLY EMPLOYEE) WITH OVERTIME PAY Step 1. Calculate Pay for Regular Hours (H x R) Step 2. Calculate Pay for Overtime Hours H x (Rate x 1 ½ times) Step 3. Add Regular Hours Pay (Step 1) and Overtime Hours Pay (Step 2) for Gross Pay

CALCULATE GROSS PAY (FOR HOURLY EMPLOYEE) WITH OVERTIME PAY Practice: Louis worked 15 regular hours and 5 overtime hours at minimum wage Louis worked 15 regular hours and 5 overtime hours at $8. 25 (minimum wage). What is Luis’ overtime rate? ($8. 25 x 1. 5 = $_____ (OTR) Gross Pay = # Work Hours Rate ($) Pay ($) (Regular Hours) (Overtime Hours) Totals $

CALCULATE GROSS PAY (FOR HOURLY EMPLOYEE) WITH OVERTIME PAY More Practice: Alexis worked 20 regular hours and 5 overtime hours at $10 per hour What is Alexis’ overtime rate? ($10. 00 x 1. 5 = $_____ (OTR) Gross Pay = # Work Hours Wage ($) Pay ($) (Regular Hours) (Overtime Hours) Totals $

CALCULATE GROSS PAY (FOR HOURLY EMPLOYEE WITH OVERTIME PAY And More Practice: Brittany worked 20 regular hours and 5 overtime hours at minimum wage. What is Brittany’s overtime rate? ($8. 25 x 1. 5 = $_____ (OTR ) Gross Pay = # Work Hours Wage ($) Pay ($) (Regular Hours) (Overtime Hours) Totals $

CALCULATE GROSS PAY (FOR HOURLY EMPLOYEE) WITH HOLIDAY PAY And More Practice: Lisa worked 20 regular hours and 5 holiday pay hours (2 x rate) at $10 per hour. What is Lisa’s overtime rate? ($10. 00) x 2 = $_____ OTR ) Gross Pay = # Work Hours Wage ($) Pay ($) (Regular Hours) (Holiday Hours) Totals $

CALCULATE GROSS PAY (FOR HOURLY EMPLOYEE) WITH HOLIDAY PAY And More Practice: Andrea worked 20 regular hours and 4 holiday pay hours at minimum wage Gross Pay = # Work Hours Wage ($) Pay ($) (Regular Hours) (Holiday Hours) Totals $

DO NOW: See Payroll Practice Activity

DEFINITIONS… Gross Pay is the total amount due to an employee for a pay period. (It would include regular, overtime, holiday, vacation and sick pay, as well as any commissions, tips or bonuses. ) Net Pay is what is left from your gross pay minus all mandatory and voluntary deductions.

BASIC FORMULA FOR NET PAY: Employee's Gross Pay minus Mandatory payroll tax deductions minus Voluntary payroll deductions equals Net Pay (Net = Gross – Deductions)

DEDUCTIONS…

WHY DO I TAKE HOME LESS THAN WHAT I EARN? WHAT IS BEING DEDUCTED?

WHY DO I TAKE HOME LESS THAN WHAT I EARN? WHAT IS BEING DEDUCTED?

FICA (SOCIAL SECURITY) Federal Insurance Contributions Act Began during the depression Part of Roosevelt’s New Deal Intent was to provide income for retirement, injury-induced disability, or congenital disability

FICA (SOCIAL SECURITY) Rate is 6. 2% of gross pay Employee and employer both pay 6. 2%

MEDICARE Social Security Act of 1965 Provides medical insurance for senior citizens and handicapped individuals Part of Lyndon B. Johnson’s Great Society Rate is 1. 45% of gross pay Employee and employer both pay 1. 45%

FEDERAL INCOME TAX 16 th Amendment In 1913, Wyoming ratified the 16 th Amendment, providing the three-quarter majority of states necessary to amend the Constitution. The 16 th Amendment gave Congress the authority to enact an income tax. That same year, the first Form 1040 appeared after Congress levied a 1 percent tax on net personal incomes above $3, 000 with a 6 percent surtax on incomes of more than $500, 000.

FEDERAL INCOME TAX Payroll deduction is an estimate Federal Income tax due is computed annually Form 1040 for prior year filled out and mailed to federal government by April 15 th At that time, you pay remainder due or receive refund if overpaid

Federal Income Tax § Based on Federal Tax Tables and Annual Salaries:

STATE INCOME TAX Payroll deduction is an estimate Actual tax due is computed annually Form NJ 1040 filled out and mailed to state government by April 15 th At that time, you pay remainder due or receive refund if overpaid

SIT – PROGRESSIVE TAX Based on NJ Tax Tables and Annual Salaries: up to $20, 000 1. 5% $20, 000 to $35, 000 2. 0% $35, 000 to $40, 000 3. 9% $40, 000 to $75, 000 6. 1% $75, 000 to $500, 000 7. 0% $500, 000 and up 9. 9%

VOLUNTARY PAYROLL DEDUCTIONS Pension Savings Plans (401 k) Union Dues Medical/Dental

CALCULATING DEDUCTIONS Practice calculating deductions on a gross salary of $100. Use the following payroll tax deductions: FICA – 6. 2% _______ Medicare – 1. 45% FIT – 10% SIT – 1. 5% 6. 2 % x $100 = 1. 45% x $100 = _______ 10% x $100 = _______ 1. 5% x $100 =_______ What is your total deductions? _______

CALCULATING DEDUCTIONS s n o i t c u d e d l l A : e r t u o o y N f t Practicepcalculating deductions o on a gross an % t 0 r 2 o t u o b Im a o t p u d salaryhooful$100. Use the following d a d s r u o y. y s r I a l : a k payroll tax deductions: s c s e s h % c 0 gro 2 n t o u i o t b a a l s u n c l o i a uct x $100 = FICA ed% –C 6. 2% total 6. 2 d r o f r e ? _______ y r answ a l a s s s o r g r u o y f o Medicare – 1. 45% x $100 = _______ FIT – 10% SIT – 1. 5% 10% x $100 = _______ 1. 5% x $100 =_______ What is your total deductions? _______

CALCULATING DEDUCTIONS Practice calculating deductions on a gross salary of $500. Use the following payroll tax deductions: FICA – 6. 2% _______ Medicare – 1. 45% FIT – 10% SIT – 1. 5% 6. 2 % x $500 = 1. 45% x $500 = _______ 10% x $500 = _______ 1. 5% x $500 =_______ What is your total deductions? _______

CALCULATING DEDUCTIONS Practice calculating deductions on a gross : k c e h salary of $500. Use the following c n n o i o t i c t u a d l e u d c l l a a t o C t r tax deductions: o f payroll r e w ans ? y r a l a s s your I s % x $500 = s o r g r FICA – 6. 2% 6. 2 u o y f o 0% 2 _______ Medicare – 1. 45% x $500 = _______ FIT – 10% x $500 = _______ SIT – 1. 5% x $500 =_______ What is your total deductions? _______

See Homework

DO NOW: Explain why it is important to recognize that deductions between 20 -30% may be taken out of your pay…

DO NOW: Round the following number to tenths, hundredths, and thousands: 6. 5518 tenths hundredths thousands

ROUNDING PRACTICE See Rounding Practice Handout

DAILY GOALS I will be able to correctly round numbers to the tenths, hundredths and thousands. I will be able to calculate net pay.

SALARIED EMPLOYEES ARE NOT ON A TIME CLOCK … These employees get an annual salary that is paid: * Monthly (12 times per year) * Twice a Month (24 times per year) * Bi. Weekly (26 times per year)

BASIC NET PAY FORMULA: (FOR HOURLY EMPLOYEES) Net Pay = Gross Pay – Deductions N=G-D

BASIC NET PAY FORMULA: (FOR HOURLY EMPLOYEES) Practice: Calculate Neve’s Net Pay. Neve’s Gross is $200 and Deductions are $40? Net Pay = Gross Pay - Deductions

BASIC NET PAY FORMULA: (FOR HOURLY EMPLOYEES) Practice: Calculate Eric’s Net Pay. Neve’s Gross is $300 and Deductions are $60? Net Pay = Gross Pay - Deductions

D): Practice: Calculate Justin’s Net Pay. Justin’s Gross is $250 with the following Deductions: Gross Pay FICA 6. 20% Medicare 1. 45% FIT 10. 00% SIT 1. 50% Total Deductions Net Pay

CALCULATING NET PAY PRACTICE See Payroll Practice Handout- Part 3

TICKET OUT THE DOOR: If it fair that taxes are taken out of your pay?