CH10 PPT

10.
1 Gross Pay
 Find the gross pay per paycheck based on
salary.
 Find the gross pay per weekly paycheck
based on hourly wage.
piecework wage.
commission.
Business Math, Eighth Edition © 2009 Pearson Education, Inc. Upper Saddle River, NJ
Cleaves/Hobbs 07458 All Rights Reserved
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 1½ (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.
Here’s 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
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.
Here’s 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?
Jorge’s 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
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.
Here’s 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
 Marisa’s 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 IRS tax tables.
 Find federal tax withholding per paycheck
using the IRS 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
one’s income.
 Federal tax withholding: the required amount
to be withheld from a person’s 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 employee’s filing status (single, married or
head of household)
 The number of withholding allowances the
employee claims
 The type of pay period
 The employee’s adjusted gross income
Adjusted gross income
 Allowable adjustments to the gross income,
such as qualifying IRAs, tax-sheltered
annuities, 401Ks, or employee-sponsored
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 employee’s 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 employee’s

adjusted gross income for the pay period.
Calculate the amount
 Dollie Calloway’s 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 Dollie’s
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: Joe’s 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 employee’s
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
 Beth’s 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.
Beth’s 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 Employer’s Payroll Taxes
 Find an employer’s total deposit for

withholding tax, Social Security tax and
Medicare tax per pay period.
 Find an employer’s SUTA and FUTA tax due

for a quarter.
10.3.1 Find the Employer’s
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 employer’s
portion.
 Find the Medicare tax for all employees for the period
and multiply by two to include the employer’s portion.
 Add the Social Security, Medicare and withholding tax
amounts for total amount.
Find the employer’s total deposit
Employee Gross Withholding Social Medicare Net

Earnings Security 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 employer’s deposit
Employee’s Employer’s
Contribution Contribution Total
Social
Security $447.58 $447.58 $895.16
Medicare $104.68 $104.68 $209.36
Withholding $751.03 0 $751.03
Total Employer Deposit $1,855.55
10.3.2 Find the Employer’s SUTA
Tax and FUTA Tax for a Quarter
 FUTA (Federal State Unemployment Tax Act)

and SUTA (State Unemployment tax) are paid
entirely by the employer and do not affect the
employee’s paycheck.
 FUTA is currently 6.2% of the first $7,000 earned
by an employee in a year minus any amount
the employer has paid in SUTA (up to 5.4%).
 FUTA and SUTA are paid on a quarterly basis.
FUTA and SUTA
 The amount a company pays in SUTA will
depend on a company’s unemployment
history.
 If an employer pays 5.4% in SUTA, then the
company will pay 0.8% in FUTA.
 If the amount owed in FUTA in a given
quarter is less than $100, then no payment
is made that quarter and the amount is
added to the following quarter.
Calculate the SUTA and FUTA
 George earns $40,000 a year. If the SUTA
rate is 5.4%, calculate the amount of SUTA
that George’s employer will pay on his
behalf for the first quarter. Then, calculate
the amount of FUTA. [Remember, it is
calculated only on the first $7,000 in
income.]
 SUTA = $378
 FUTA = $ 56

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10.

 Martha, who earns $48,000 a year and is paid

 Bill, who earns $35,000 a year and is paid

 Net earnings (net pay/take-home pay): the

 Overtime rate: rate of pay for hours worked

 Time and a half: standard overtime rate

 Regular pay: earnings based on an

 Overtime pay: earnings based on

1. Find the regular pay by multiplying the

 Find the weekly earnings for these employees:

 Allison worked 44 hours.

 Piecework rate: amount of pay for each

 100 x $1.32 = $132.00

 Commission: earnings based on sales.

 Use the formula: P = R x B to find her earnings.

 To calculate federal withholding tax using the IRS

Tax-free or tax-deferred benefits

 Ricardo, married, paid weekly, claiming 4

 Instead of using tax tables, many companies

 Find the exempt-per-allowance amount from the

 Multiply the number of withholding allowances claimed

 Subtract the exempt amount from the employee’s

 Subtract the exempt amount ($261.54) from the

 Find the amount of the earnings subject to be

 Social Security taxes are currently capped at

 Multiply the taxable amount by 6.2% or 0.062 to

 A self-employed person must pay the

 Find the gross pay for the pay period.

 Find an employer’s total deposit for

 Find an employer’s SUTA and FUTA tax due

 Find the total of withholding tax for all employees for

Employee Gross Withholding Social Medicare Net

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

Medicare $104.68 $104.68 $209.36

Withholding $751.03 0 $751.03

Total Employer Deposit $1,855.55

 FUTA (Federal State Unemployment Tax Act)

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