To calculate gross pay for salaried employees
- Start with the employee's annual salary and divide by the number of pay periods in a year. That amount is the employee's gross pay for the pay period. Here is an example, if an employee makes $24,000 a year, and your company pays twice a month, that's 24 pay periods in a year, so the gross pay for each pay period is $1,000.
- Add any other pay that the employee received, such as reimbursements. Bonuses may be added to the paycheck but they are more commonly paid in a separate check.
- Subtract any unpaid time off (unusual for a salaried employee).
To calculate gross pay for hourly employees
- Take the information on the employee's hours worked from the timesheet or other way you record employee time.
- Calculate regular pay by multiplying the total hours worked in the pay period (not including overtime hours) times the employee's hourly pay rate.
- Check to see if the employee has worked any overtime hours. You must pay overtime at a minimum of 1 1/2 times regular hourly pay for any hours worked over 40 hours in a week, and calculate overtime pay.
- Add any other pay the employee may receive, such as a reimbursement.
An example of how to calculate hourly gross pay:
Here is an example of the hourly employee gross pay calculation:
Let's say an employee is paid $5 an hour and worked 43 hours in a work week and you pay overtime at 1 1/2 times for all hours over 40.
- First, calculate regular pay: $5 x 40 hours = $200
- Then, calculate overtime pay $5 x 1.5 x 3 hours = $22.50
- The total gross pay is $222.50