Unit 43 Paycheck Calculation Basic Principles of Paycheck
Unit 43 Paycheck Calculation
Basic Principles of Paycheck Calculation • Two main terms are used regarding payroll: gross pay and net pay. – Gross pay is the total amount of money earned for hours worked. – Net pay, often called “take-home pay, ” is the amount of money left after all deductions have been subtracted from the gross pay.
Calculating Gross Pay • To determine gross pay, multiply the wage per hour times the number of hours worked. • Overtime pay is usually calculated at time and a half or double time. – If overtime is one and a half, multiply the overtime hours by 1. 5 and then multiply by the wage per hour. – For double time, multiply the overtime hours by two and then multiply by the wage per hour.
Calculating Net Pay • To determine net pay, individual deductions must be calculated first. – Tables are used to determine the appropriate deduction. – Use the most recent tax tables available.
Calculating Net Pay • To calculate the deduction for state income tax, similar tables are available in many states. – In other states, the state income tax is a percent of gross income and the deduction is determined by multiplying the state percent times the gross pay.
Calculating Net Pay • The deduction for FICA (Social Security) includes 6. 2% of the first $106, 800 income and a Medicare deduction of 1. 45% of the total in income for a total deduction of 7. 65%, or 0. 0765 in decimals. – The gross pay is multiplied by this percent to obtain the correct deduction for FICA.
Calculating Net Pay • City or township taxes are usually a percent of gross income and are calculated the same way state tax is calculated. • To calculate the net pay, all of the deductions must be subtracted from the gross pay.
Basic Principles of Paycheck Calculation • Example: A geriatric assistant earns a gross pay of $561. 05 for one week. His state income tax is 2 ½ percent, or 0. 025 when converted to decimals. What is the deduction for state income tax? Gross Pay x Percent of Tax = Deduction for State Tax $561. 05 x 0. 025 (2 ½ %) = $14. 02625 $14. 03 = Deduction for State Tax
Practical Problem • A registered nurse (RN) works 47. 5 hours at an hourly wage of $28. 72. He earns time and a half for all hours over 40 hours. • What is his gross pay?
Practical Problem • Hourly wage x hours worked = regular gross pay 40 x $28. 72 = $1, 148. 80 • Hourly wage x hours worked x 1. 5 = overtime gross pay $28. 72 x 7. 5 x 1. 5 = $323. 10 • Regular gross pay + overtime gross pay = total gross pay $1, 148. 80 + $323. 10 = $1, 471. 90 • The RN’s gross pay is $1, 471. 90.
- Slides: 10