Computing Gross Earnings:
(Regular Hourly Rate x Regular Hours Worked) + (Overtime Hours Worked x 1.5) + (Holiday or Double Time Hours Worked x 2.0) = Gross Earning
- Michael Ross is a legal assistant for law firm. He makes $52.35 per hour. He receives time and a half (1.5), for any overtime hours that he works. He also receives double time (2.0) for any holiday that is worked. Michael works 53 total hours, 8 hours of overtime and 5 hours on a holiday.
Calculate his gross earnings for the above given information.
| Calculate Regular Earnings: HINT: How many hours would a full time employee work? | ||||||
| Regular Earnings | = | Hourly Rate | x | Regular Hrs. Worked | ||
| Regular Earnings | = | 52.35 | 53.0 | |||
| Regular Earnings | = | 2,774.55 | ||||
| Calculate Overtime Earnings | ||||||
| Overtime Earnings | = | Hourly Rate | x | Overtime Hrs. Worked | x | 1.5 |
| Overtime Earnings | = | 52.35 | x | 8.0 | x | 1.5 |
| Overtime Earnings | = | 628.20 | ||||
| Calculate Double Time Earnings | ||||||
| Double Time Earnings | = | Hourly Rate | x | Double Time Hrs. Worked | x | 2.0 |
| Double Time Earnings | = | 52.35 | x | 5 | x | 2.0 |
| Double Time Earnings | = | 523.50 | ||||
| Gross Earnings: HINT: (Use your answers from above) | ||||||
| Gross Earnings | = | Regular Earnings | + | Overtime Earnings | + | Double Time Earnings |
| Gross Earnings | = | 2,774.55 | + | 628.20 | + | 523.50 |
| Gross Earnings | = | 3,926.25 | ||||
- Calculating Payroll Deductions and Net Pay
Net pay is computed by using the following formula: Net Pay = Gross Pay – Deductions. Deductions are Federal and State withholdings, Social Security and Medicare taxes withholding. These deductions are the computed and added together to arrive at your payroll deductions.
For the purpose of this example we are going to say that federal withholding is at 25% and State withholding is at 7% of the gross yearly salary. Social Security tax is calculated at 6.2% (.062) and Medicare is calculated at 1.45% (.0145). Given the information above, let’s calculate the annual Deductions and Net Pay for an employee who makes $75,000 a year.
HINT: You will multiply Net pay by each of the tax with holdings for each line. To get net pay you will subtract those answers, from each line, from gross pay to get the net pay total.
Just like your paycheck, taxes must be withdrawn from your gross pay to get your “take home pay.”
| Annual Gross Salary | $75,000.00 | ||||||
| Federal Taxes Withheld (25% or .25) | = | x | = | ||||
| State Taxes Withheld (7% or .07) | = | x | = | ||||
| Social Security Taxes (6.2% or .062) | = | x | = | ||||
| Medicare Taxes (1.45% or .0145) | = | x | = | ||||
| Annual Net Salary | |||||||
- Calculating Payroll Deductions and Net Pay
Another way of calculating payroll deductions is on a check by check basis. We can do this by starting with the gross paycheck then deducting the payroll deductions.
Instead of calculating the federal withholding as a percentage, we can use the following tables to look up the federal withholding by looking at to see if they are single or married and how many withholding allowances they claim on their W-4. Below are the tables for a Single Persons and a Married Persons who get paid on a weekly basis.
So if this employee is married, they made $1,165 a week, with 2 withholding allowances for Federal purposes, State withholding is 5% of the gross paycheck and Social Security is at 6.2% and Medicare is at 1.45%. Calculate the net paycheck.
| Gross Weekly Paycheck | $1,165.00 | |||||||
| Federal Taxes Withheld (Use table above) | – | |||||||
| State Taxes Withheld (5% or .05) | = | x | = | – | ||||
| Social Security Taxes (6.2% or .062) | = | x | = | – | ||||
| Medicare Taxes (1.45% or .0145) | = | x | = | – | ||||
| Weekly Net Salary | = | |||||||
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