How to Calculate Payroll Hours

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The employee deserves an accurate paycheck. The payroll processor must examine the details of the paycheck to accurately calculate payroll hours.

Instructions

Determine Hours

1. Add regular, vacation, holiday, personal and sick time to be paid. For example, an employee has 24 regular hours, 8 vacation, and 8 personal for the week. His hourly rate is $10 an hour. Calculate regular, vacation and personal hours at a regular rate (24 + 8 + 8 = 40 X $10= $400). Be sure to record the type of hours paid (regular, vacation and personal) in the payroll system and registers.

2. Overtime (OT) hours must be paid at time and a half. For example, an employee has 56 hours for the week. Pay the first 40 hours at his regular rate--40 x $10 an hour = $400 regular pay. Pay the rest as OT--16 hours x $15 ($10 x 1.5) = $240 OT pay. His paycheck should reflect: $400 regular + $240 overtime = $640 gross pay.

3. Some employers pay double time to employees who work on holidays. To determine double time pay, multiply the amount of hours to be paid by twice the amount of the regular pay. Example: employee has 40 reg and 6 DT hours. 40 x $10 an hour = $400 regular pay. 6 x $20 = $120 DT pay. Gross pay = $520.

4. Calculate retro pay. When an employee receives a pay raise, depending on the effective date, he may receive retro pay. For example, a pay increase from $10 an hour to $12 an hour is effective three days before the current payroll. Pay the new rate with his current payroll, so retro is due only on the three days. Assuming he worked 24 hours for the 3 days, multiply 24 hours by the difference in his pay ($2). Retro pay = $48.

5. Salaried employees are paid a set rate each pay period. However, at times you may be requested to compute their hourly or daily rate. Fir example, an employee's salary is $34,000. For the hourly rate, divide $34,000 by 2080 (work hours per year) = $16.35 an hour. For the daily rate, multiply $16.35 by 8 (daily work hours) = $130.80.

Tips & Warnings

• When calculating payroll hours, keep in mind your deductions and benefits: 401K medical, dental, cafeteria plans garnishment, child support taxes car allowance commissions These deductions and additions determine the net pay.

References

• Tips on how to Calculate Payroll Taxes
• The Basics of Calculating Overtime Pay