Calculating Gross Earnings with Different Methods of Compensation, Lecture notes of Accounting

Download Calculating Gross Earnings with Different Methods of Compensation and more Lecture notes Accounting in PDF only on Docsity!

Calculating Gross Earnings

with Differing Methods of

Compensation

What you will learn…

 Terms related to compensation  The formulas used to calculate gross pay for various methods of compensation  Using Excel to calculate the various methods of compensation

Hourly Methods of Compensation

 Based on the actual hours an employee works  Straight time (40 hours a week or less)  Overtime (All hours over 40 hours per week)  Double time (Not required by law, but nice!)

Straight time

(Anything 40 hours a week and under) Hourly Wage Rate x Number of Hours Worked

Solution

$7.20 x 38 hours = $273.

Overtime

(Anything over 40 hours. 1.5 times regular wage) Example: 55 hours @ $10.15 an hour Regular time pay: 40 x $10.15 = $ Overtime pay: 55 hours – 40 hours = 15 hours 15 hours x $10.15 x 1.5 = $112.

Overtime practice problem

Alex worked 72 hours this week and gets paid $8.25 an hour. Calculate her gross pay.

Solution

1. Calculate regular time
   • 40 x $8.25 = $
2. Calculate overtime pay
   • 72 total hours – 40 regular time = 32 overtime hours
   • 32 x $8.25 x 1.5 = $
3. Add the two
   • 330 + 396 = $

Double Time Example

Jan had to work 10 hours on Christmas day. She makes $12.00/hour. Assuming she gets double time for working on Christmas, calculate her gross pay. 10 hours x $12 an hour x 2 = $ (See example on page 203)

Double time practice problem

George worked 60 hours this week. For working 5 hours on the 4 th of July, George gets double time. George makes $9 an hour. Calculate his gross pay for the week.

Solution (cont.)

Add up the three: $360 + $202.50 + $90 = $652.

Salary

 Set amount you are paid regardless of how many hours you work.  Divide yearly salary by how many paychecks per year Example: Alice is salaried at $35,000 per year. If she gets paid weekly, what is her gross pay? $35,000 / 52 weeks per year = $673. (See example on page 208)

Solution

$36,000 / 24 paychecks a year = $1,

Salary plus commission

 Combine a set salary with a performance based system Formula for commission: (Sales – Quota – Returned Merchandise) x Commission Percentage Salary + Commission = Gross Pay (See example on page 208)