Payroll Summary
Calculating Payroll
Payroll Calculations Summary
What should you have picked up from following along with the different calculations used for determining our employees earnings ?
- Tipped Employees are subject to special rules and laws.
- All nonexempt employees must be paid overtime for all hours worked in excess of 40 hours during a week.
- Only actual hours worked are used in calculating overtime.
- We used the following methods of calculating our employee's earnings - hourly rate ,hourly rate + tips, piece rate, sales commission rate, salary for exempt, salary for nonexempt, and additional bonuses for some of our employees which illustrate that an employees earnings may be calculated using different agreed upon methods.
- Although an employer and employee may agree on any method they want to calculate an employee's earnings, the employer must pay at least the minimum wage for the actual hours worked and must also pay overtime for any hours worked over 40 during a week for all nonexempt employees.
- Bonuses, shift payments, and other compensation are normally included in calculating an employee's straight time and overtime rates.
- We based our nonexempt salaried employees earnings on a 45 hour work week.
Regular Rate and Overtime Rate Calculation
The employee's rate calculation includes other compensation in addition to the employee's base rate of pay. The employee's actual calculated rate may vary week to week depending on what compensation they earned during the period.
The employee's rate calculation includes other compensation in addition to the employee's base rate of pay. The employee's actual calculated rate may vary week to week depending on what compensation they earned during the period.
Regular Rate and Overtime Rate Includes:
- Base pay for all hours worked
- Non discretionary bonuses
- Fair market value of non cash compensation
- Shift premiums
- Production bonuses
- Cost-of-living adjustments
- Retroactive pay
- All payments not specifically excluded by law
Regular Rate and Overtime Rate Excludes:
- Reimbursed business expenses
- Overtime in excess of FLSA requirement
- Employer benefit plan contributions
- Vacation/holiday/sick pay for unworked hours
- Gifts on special occasions
- Discretionary bonuses
- Stock options
What was my purpose in using many different methods for calculating our employee's earnings ? To illustrate that calculating an employees earnings is not always just a simple exercise of multiplying hours times a rate.
What's Next ?
Employee Payroll Deductions