Employees have to get paid for the work they do. It is the employer’s responsibility to ensure this happens. Employee payroll is the most essential commitment required to run all fundamental business operations effectively. Many companies outsource payroll services from reliable firms like ASAP Payroll to make the process seamless.
Accurate payroll calculation ensures your business complies with your state’s numerous employment and tax policies. Unfortunately, most employers don’t put much focus on the payroll, while others are not well-versed with the process.
Calculating payroll is pretty simple, even if you have had an issue before. In this post, you will get a breakdown of the payroll process to make it seamless. Let’s dive in!
How to Calculate Payroll
The bulk of payroll calculation starts with getting accurate gross wages. Determine if it is hourly or salary and then reduce all deductions and taxes from that amount to get the final payment that employees will receive in their paycheck. The gross wage calculation and the deduction depend on several factors and follow these general guidelines:
Calculating payroll for hourly employees
For businesses that pay their employees on an hourly basis, the first thing is to keep accurate track of hours worked. Some companies use timesheets, while others use time clocks to get time records required to submit payroll.
For example, if a non-exempt employee works the standard 40-hour a week, you can calculate the gross pay using this formula:
Hours worked by salary per hour:
40 x $15 = $600
Suppose the same employee works 45 hours in the subsequent week; your calculation will be something like this:
Get the standard gross pay with the above formula;
40 x $15 = $600
Then get overtime hours per hour by overtime pay rate;
5 x $15 x 1.5 = $112.50
Add the two to get the regular pay
$600 + $112.5 = %712.5
Equally important, if the employee is not exempt from the Fair Labor Standards Act (FLSA), you should pay overtime for any hours worked over the 40 standard hours, in a seven-day workweek.
Calculating payroll for salaried employees
Calculating payroll for your salaried employees is even simpler. What you need to know is the base salary and amount of pay periods in a year.
For an employee with a base salary of $40,000 who receives pay twice a month, the calculation looks like this:
Divide $42,000 over 24 pay periods to get $1,750 as the gross pay per period.
If you pay employees biweekly, the calculation will look like this:
$42,000 ÷ 26 pay periods = $1,615.38
Employment taxes
One last thing to finish up calculating payroll:
After paying hourly wages, salaries, and bonuses, you still need to pay tax for every employee. You can get this by:
- Social Security/FICA: Currently calculated at 6.2% of the first $90,000 of salary
- Unemployment/FUTA: Currently estimated at 6.2% of $7,500 of salary
- Medicare: Currently calculated at 1.34% of any salary
- Workman’s compensation: The calculation will depend on the employee category. For clerical, the rate goes for 0.3% of salary while manufacturing goes for about 7.5% of salary.
Benefits
The benefits are employer’s discretion that they offer to attract and retain their top talent. A typical benefits package for employees earning about $50,000 may include health insurance, life insurance, and dental coverage. Other benefits may be long-term disability insurance, tuition reimbursement, dependent care assistance, and retirement plans.
Save Time and Stress with ASAP Payroll
Accurate and on-time paychecks are the key to boosting your employee morale and satisfaction in the workplace. They want to feel appreciated and understand how much effort they put into ensuring the company’s success. At ASAP Payroll, we let you rest easy as we handle all issues with employee paychecks. For all your payroll solutions, don’t hesitate to contact us today.
