manager is paid bi-weekly, the gross pay would be $1,846.15 for each of the 26 pay periods.) A salariedemployee's work period usually ends on payday; for example, a paycheck on January 31 usually coversthe work period of January 16
31. This is convenient for accounting purposes if the company preparesfinancial statements on a calendar month basis.
Wages are often associated with production employees (sometimes referred to as "blue-collar"workers), non-managers, and other employees whose pay is dependent on hours worked. The pay forthese employees is generally stated as a gross, hourly rate, such as "$13.52 per hour." Again, the "gross"amount refers to the pay an employee would receive before withholdings are made for such things astaxes, contributions, and savings plans.Employees receiving wages are often paid weekly or biweekly. To determine the gross wages earnedduring a work period, the employer multiplies each employee's hourly rate times the number of workhours recorded for the employee during the work period. Due to the extra time needed to makecalculations for each employee, hourly-paid employees typically receive their paychecks approximatelyfive days after the work period has ended.When the hourly-paid employees have work periods that are weekly or biweekly, but the company'sfinancial statements cover calendar months, the company will likely have to prepare an accrual-typeadjusting entry at the end of the month. If hourly wages are a significant portion of a company'sexpenses, it is critical that the company report the correct amount of wages expense that pertains to the30 or 31 days in the month, not the 28 days in a four-week work period.
Bonuses & Commissions Paid to Employees
Throughout our explanation, bonuses paid to employees and sales commissions paid to employees willbe considered to be part of salaries.
Overtime refers to time worked in excess of 40 hours per week. Whether or not employees are paid forovertime depends on each employee's job responsibilities and rate of pay
some employees areexempt from overtime pay and some are not. For example, executives are considered to be "exempt";their employers are not required to pay them for their overtime hours because (1) their compensation ishigh, and (2) they can control their work hours. Executives do not need state or federal wage and hourlaws to protect them from company abuse.On the other hand, a design technician earning an annual salary of $18,000 per year is probably not incontrol of her work hours. If she works for an executive who decides to work 60 hours per week, thedesign technician needs to be protected from having to work 60 hours per week for no more pay thanshe would receive for 40 hours of work. This employee is considered a "nonexempt" employee
she isnot exempt from being paid overtime compensation. Some unethical companies have been known toclassify "hourly wage" employees as "salaried" in hopes of making them exempt from overtime pay
federal and state laws exist to prevent such unfair treatment of employees.When processing payroll, don't assume that it's only the hourly paid employees who receive overtimepay
state and federal laws require overtime payments to lower-paid salaried employees. It is alsopossible that some generous employers will give overtime pay to employees who are not required bylaw to receive it.
refers to the "half" portion of "time-and-a-half" or "time-and-one-half" overtimepay. For example, assume an employee in the production department is expected to work 40 hours perweek at $10 per hour. If the employer requires the employee to work 42 hours in a given week, theextra two hours are paid at time-and-a-half and the employee earns a total of $430 for the week (40hours × $10 per hour, plus 2 overtime hours × $15 per hour). It can also be computed as 42 hours at thestraight-time rate of $10 per hour plus 2 hours times the overtime premium of $5 per hour.
yroll Withholdings: Taxes & Benefits Paid by Employees