Payroll

By: The Accounting Department

What is payroll?

- Payroll is the amount of money employees get paid by

the company during a period of time. It includes
determining an employee’s gross pay, taking out any tax
deductions and giving them their net pay(take home pay).
- Payroll is subject to federal and state regulations
- Payroll is also a big part of the net income of a company
- Payroll must be done on time and correctly
Payroll Laws and taxes
- Companies have to follow the Fair Labor Standards Act, requires
employers to pay a minimum rate of 1.5 times the normal rate for
all extra hours worked(more than 40 hours a week)
- FICA is a federal payroll tax, it's the combination of your social
security and medicare contributions. Employers must match the
employees contributions
- The federal and state unemployment compensation taxes, FUTA
and SUTA, are employer taxes that provides temporary payments
for the unemployed
Gross Pay vs. Net Pay

- Gross pay is the total earnings of an employee for a pay

period
- Net pay is the amount employees get to take home after
deductions
- Practice Problem:
Assume George is a cashier and works at Trader Joe’s. The regular
rate is 28$. If George worked 49 hours what is his gross pay?
Income taxes and deductions

Taxes and deductions include

- Federal income tax
- State income tax
- Social Security
- Medicare
- 401k and retirement savings
The federal income tax is determined by your gross pay, W-4 and a withholding
table give by the IRS. On your W-4 you can put your marital status and any
dependents you might have. This decreases the amount of money subject to the
federal income tax. Once that number is determined, you use the withholding table
to find the amount to withhold for federal income tax. You find the number when
filling out your W-2 forms.
How do we determine
payroll?
 Gross pay

Gross pay is the amount of

money employees receive
before any deductions or
taxes are taken out. It is found
by multiplying the hourly rate
by the number of hours
worked in a given time
period.
 Social Security

Social Security is part of the

FICA tax and it provides
payments for people with
retirement, disability and
survivor benefits. You pay this
tax until you make a total
income of 142,800$. Social
security rate is currently at
6.2%.
 Medicare

Medicare tax is a
federal employment tax
that funds health
insurance for senior
citizens, it is also the
other part of the FICA
tax. The Medicare tax
rate is currently at
1.45%
 Federal income tax

Federal income tax is a type of

tax that governments impose
on income generated by
businesses and individuals
within their jurisdiction. The
rate indicated by the VE tax
table for the amount we make
is 10%.
 State income tax

State income tax is a tax on

income earned in that state. It is
similar to a federal income tax,
but state income tax generally
funds state budgets rather than
the federal government. The New
York state income tax for the
amount we make is 4%.
 Net Pay

Unlike gross pay, net

pay is the amount an
employee receives
after all necessary
deductions have been
made.
 Company matching expenses

The company has

to match the
employee's
contributions to the
FICA tax.
Payroll Activity

Mark is an accountant for a big accounting firm in NYC. From

October 1 to October 15 he worked 80 hours and is paid $22
hourly. He does not have any retirement saving plans set up.
Using this data and what you learned, you will complete a
payroll register for this pay period and determine his net pay.
The link below will bring you to a blank register, please make
a copy and fill out the form. Once you are done please email
me the completed form, it will be graded. Good Luck!!

https://docs.google.com/spreadsheets/d/1OKsNuhVygar9Fs
RXSKAbsgUNfkqqjSCZb1q5F2IKWBs/edit?usp=sharing