1. Money

How Do I Calculate Gross Pay for Salaried and Hourly Employees?

By

Question: How Do I Calculate Gross Pay for Salaried and Hourly Employees?
Gross pay is the total amount of an employee's pay each pay period, including regular pay, overtime pay, and any other payments (reimbursements, for example). Gross pay is calculated first, then it is reduced by withholding for federal and state income tax and deductions for FICA tax, other taxes, and other voluntary contributions and benefits.
Answer:

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).
Salaried employees do not receive overtime pay.

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

©2014 About.com. All rights reserved.