How to Figure Payroll

Payroll is a detailed task that requires good mathematical and solid problem-solving abilities. One of the most important steps in payroll is figuring employees' payroll hours. The payroll staff must consider the employee's payroll status when computing the wages, including pay frequency, such as weekly or biweekly, and the employee's pay type, such as hourly or salaried.

Instructions

1. Ensure that you are figuring payroll hours for the correct pay period. The payroll hours you are computing should cover the time frame for which the employee is being paid. Example: if the pay frequency is biweekly, the employee should be paid for hours worked in the last two weeks.

2. Determine hours for hourly employees. Hourly employees are paid according to the number of hours they work. Generally, they must punch a time clock or complete weekly time sheets. Calculate the employee's hours worked for the day and the week from the time sheet.

   Look under the regular column of the time sheet for regular hours worked, which should be paid at the employee's regular rate. Example: the employee's punches for one day show in---7:30 a.m.; lunch---11:30 a.m. to 12 p.m.; out---4 p.m., totaling 8.5 hours. Deduct 30 minutes for unpaid lunch. Therefore, the employee should be paid for 8 regular hours.

   Check the overtime-hours column. Pay overtime at time and a half. Example: in---6 a.m.; lunch---11 a.m. to 12 p.m.; out---5 p.m. The employee's regular pay rate is $10/hour. 6 a.m. to 5 p.m. is 11 hours. Deduct 1 hour of unpaid lunch. Consequently, the employee should be paid for 10 hours, 2 of which should be paid at his overtime rate ($10 x 1.5 = $15 overtime rate).

   Note that the employee must work at least 40 hours for the week to be eligible for overtime pay. Example: if she has 36 regular hours and 8 vacation hours (36 + 8 = 44), the extra 4 hours should be paid at her regular pay rate because she did not work 40 hours for the week.

3. Change military time to regular time. Example: in---900 a.m.; out 1300 p.m. equals in---9 a.m.; out---1 p.m.

4. Round the employee's time to the nearest quarter hour. Example: 5:05 p.m. equals 5 p.m.; 6:10 p.m. equals 6:15 p.m.

5. Keep salaried employees' pay the same each pay period unless you are making a pay adjustment (e.g., pay increase) or prorating the employee's pay. In the latter case, pay or dock the salaried employee's pay based on her daily rate. To arrive at her daily rate, use the following example:
   $45,000 (salary) / 26 (biweekly) pay periods / 10 days = $173.08 (daily rate).

References

• Spectrum Research: How to Calculate a Time Card