Calculating Gross Pay
Introduction
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People work for a compensation.
An employee is a person that works for
others which are called employers.
Merriam Webster defines an employee
as: “one employed by another usually
for wages or salary and in a position
below the executive level.”
Introduction
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An employer hires employees to work.
There are many ways in which an
employee can be compensated for
his/her talents including but not limited
to an hourly wage, salary, per diem,
piecework, straight commission, and
graduated commission.
Gross Pay
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Gross pay is the amount of money a
person receives for working.
Gross pay is the actual amount you
earn, but not the amount of your takehome pay.
Federal, state, local, Social Security and
Medicare taxes are deducted from your
pay as well as other items you choose
to have deducted such as health
insurance, union dues, etc.
Gross Pay
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Net Pay (amount you actually take
home) = Gross Pay – Deductions. Gross
pay is pay before any deductions are
made.
Salaried Employee/Average
Pay
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A salaried employee receives a set
amount of money each pay period
whether he/she works 40 hours a week
or 60 hours a week.
If a salaried employee earns $24,000 a
year based on a 40 hour week, his/her
gross pay for one month is $2000
(24,000/12 months) or his/her weekly
gross pay is 461.54 (24,000/52 weeks).
Salaried Employee/Average
pay
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If a salaried employee works more than
40 hours a week, the employee’s pay
doesn’t change because he/she is
salaried.
Most companies will allow employees to
receive sick days and vacation days, so
if an employee works less than 40
hours, he/she can use sick leave or
vacation leave.
Hourly Wage
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An employee that gets paid by the hour
is called an hourly employee.
They are paid for each hour worked.
They also receive overtime and
sometimes double-time pay if they work
over the specified regular time and on a
holiday.
Hourly Wage
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For example: Mary works 8 hours a day at
$15.00 an hour. What is her daily gross pay?
Hourly wage x number of hours
worked=Gross Pay
$15.00 (Hourly Wage) x 8 (Number of hours
worked) = $120 (Gross Pay) The formula is:
Gross Pay = Hourly Rate X Hours Worked
Formulas
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Net Pay (amount you actually take
home) = Gross Pay – Deductions. Gross
pay is pay before any deductions are
made.
Salaried Employees/Average pay =
Annual salary / number of weeks paid
Hourly wage x number of hours
worked=Gross Pay
Assignment
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Page 7
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11-24
Overtime Pay
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Hourly employees receive overtime for all
hours worked over the regular working hours.
Some companies pay overtime for all hours
worked over 8 hours a day.
Others pay overtime for all hours worked
over 40 hours a week. It depends upon the
company’s pay policy.
Overtime Rate is usually 1.5 times the regular
hourly rate.
Overtime Pay
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If an employee earns $15 an hour, the
overtime rate would be $15 x 1.5 =
$22.50 an hour for only those hours
worked beyond the regular hours.
For an example: Veronica’s regular
hourly rate is $7.50 an hour based on a
40-hour week--any hours over 40 hours
a week will be considered overtime.
Overtime Pay
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Last week she worked 43 hours.
What is her gross pay?
Her gross pay would be: Regular hourly
rate: 7.50 Overtime rate: 7.50 x 1.5 =
11.25 40 x 7.50 = 300 3 x 11.25 =
33.75 Gross Pay is 333.75 (300 +
33.75)
Overtime Pay
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Some company’s overtime policy states
that overtime will be given for any
hours worked over 8 hours a day.
For an example: Charleen’s hourly wage
is $9.50 an hour.
She receives overtime for any hours
worked over 8 hours a day.
Overtime Pay
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If on Monday she worked 8.5 hours;
Tuesday 8 hours; Wednesday 9 hours;
Thursday 8 hours; and Friday 10 hours.
What is her gross pay?
Regular hours = 40; Overtime hours =
3.5
Overtime Pay
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Regular hourly rate 9.50; Overtime
hourly rate is 9.50 x 1.5 = 14.25; Gross
Pay = (40 x 9.50) + (3.5 x 14.25);
Gross Pay = 380 + 49.88; Gross Pay =
429.88
Double-time pay
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Some companies but not all give
double-time pay if it is necessary to
work on a holiday such as Labor Day,
Christmas Day, Thanksgiving, or even
weekends.
Remember—not all companies do this.
They may just pay time and a half or
nothing extra.
Double-Time Pay
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For an Example: Thelma works for a company
that pays double time for all holiday work.
Since production is up, the company needs
Thelma to work on Labor Day at double time.
If she works 8 hours on Labor Day and
receives double time pay, what will her gross
pay be for that day if her hourly wage is
12.50?
12.50 x 2 = 25; 8 x 25 = $200 for working
Labor Day.
Formulas
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Overtime pay = 1.5 x Regular Pay Rate
Double time pay = 2 x Regular Pay
Rate
Assignment
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Page 18
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12-24
Per Diem
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A per diem employee receives
compensation per day.
For an example, if a per diem (meaning
per day) employee receives $100 a day
and works 9 days, the gross pay will be
$900.
The Per Diem formula is: Number of
Days worked X Pay Per Day = Gross
Pay
Piecework Pay
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Many employees are paid for each piece they
produce.
Piecework pay is probably the oldest type of pay
dating back before the 1600s. It is usually found in
the garment industry and sometimes in the electronic
industry.
Piecework employment can allow employees to work
from home.
Employers believe that piecework is a performancerelated pay.
The faster and better an employee works, the more
pay he/she will receive.
Piecework Pay
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The gross pay is calculated by multiplying the
number of useable pieces produced by rate
per piece.
For an example: Mary paints beautiful flowers
on plates. She receives $3.25 per usable
plate. If she painted 200 usable plates and 5
unusable plates in a week, her gross pay
would be:
200 x 3.25 = $650. The formula is: Number
of Usable Pieces Produced X Piece Rate =
Gross Pay
Tip Wages
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Some employees are paid by tips.
A tip or gratuity is the amount of money
a person receives for a service they
provide.
For an example: Thomas works as a
waiter at a local restaurant. He receives
$2.10 an hour plus tips.
He works 40 hours a week and
averages $250 in tips. Thomas’s gross
pay would be 40 x 2.10 + 250 = $334.
Formulas
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Per Diem = Number of Days worked X
Pay Per Day
Piecework pay = Number of Usable
Pieces Produced X Piece Rate
Formulas
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Tip wages = Tip percent x Total bill
Or
Tip wages = Tip per unit x Number of
Units
Conclusion
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Gross Pay is the amount an employee
earns before taxes and any other
deductions.
If you are an hourly employee, gross
pay is based on the hourly rate times
the number of hours worked.
Hourly employees can be paid overtime
at time and half or double time.
Conclusion
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If you are a salaried employee, gross
pay is a set amount earned monthly or
semi-monthly or weekly regardless of
the number of hours worked.
A per diem employee’s gross pay is
based on the number days worked and
the wage per day.
Conclusion
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A piecework employee’s gross pay is
based on the number of usable pieces
produced.
Tip employee’s gross pay is the hourly
wage times hours worked added to tips
received.
Assignment
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Page 30
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9-17