Many businesses choose to pay employees on a salary basis instead of by the number of hours worked. Salaried employees are paid the same amount every payday, regardless of the number of hours worked. This is especially beneficial in the case of exempt employees, who are not subject to receiving overtime pay. Exempt employees include certain white-collar and administrative employees, whereas non-exempt employees must be paid overtime if they work more than 40 hours per week. However, if you have to terminate a salaried employee, you must make sure to calculate his/her final pay correctly as it may be slightly more complicated than for hourly employees.

Determine the employee’s daily rate of pay. To do this, take his/her annual salary and divide it by 52, which is the number of weeks in a year. Then divide this number by five, which is the number of work days in a week. The resulting number is the employee’s daily rate of pay. If the salary is based on a monthly or biweekly rate, more calculation is necessary. A monthly rate may be multiplied by 12 to arrive at the yearly rate; and a bi-weekly rate should be multiplied by 26. Also, if the employee regularly works more than five days a week, you must calculate their daily rate of pay based on the number of days they usually work.

Determine how many days of the month the employee was employed with the company. When calculating this number, you should only count work days because you determined the employee’s daily rate of pay based on work days only. If you are two weeks into the month and, excluding weekends, the employee worked 10 days, the employee will be paid for 10 days of work. Be sure to comply with company policy in calculating days worked. For example, sick and personal days may be paid, while other days off work may not be.

To calculate the employee’s gross salary for the time period before termination, multiply the daily rate of pay by the number of days worked in the pay period.