Calculating Gross Earnings Calculating Gross Earnings with Differing Methods of with Differing Methods of

CompensationCompensation

What you will learn…What you will learn…

Terms related to compensationTerms related to compensationThe formulas used to calculate gross pay The formulas used to calculate gross pay

for various methods of compensationfor various methods of compensationUsing Excel to calculate the various Using Excel to calculate the various

methods of compensationmethods of compensation

What is compensation?What is compensation?

Several methods of Several methods of being compensated:being compensated:

Straight timeStraight time OvertimeOvertime Double timeDouble time

Salary with Salary with commissioncommission

SalarySalary CommissionCommission PieceworkPiecework

The money you receive for working!

Hourly Methods of CompensationHourly Methods of Compensation

Based on the actual hours an employee Based on the actual hours an employee worksworksStraight time (40 hours a week or less)Straight time (40 hours a week or less)Overtime (All hours over 40 hours per week)Overtime (All hours over 40 hours per week)Double time (Not required by law, but nice!)Double time (Not required by law, but nice!)

Straight timeStraight time

(Anything 40 hours a week and under)(Anything 40 hours a week and under)

Hourly Wage Rate x Number of Hours Hourly Wage Rate x Number of Hours Worked Worked

See example on page 202See example on page 202

Straight time practice problemStraight time practice problem

Bob gets paid $7.20 an hour. This week, he Bob gets paid $7.20 an hour. This week, he worked 38 hours. Calculate Bob’s gross worked 38 hours. Calculate Bob’s gross pay.pay.

SolutionSolution

$7.20 x 38 hours = $273.60$7.20 x 38 hours = $273.60

OvertimeOvertime

(Anything over 40 hours. 1.5 times regular (Anything over 40 hours. 1.5 times regular wage)wage)

Example:Example:

55 hours @ $10.15 an hour55 hours @ $10.15 an hour

Regular time pay: 40 x $10.15 = $406Regular time pay: 40 x $10.15 = $406

Overtime pay: 55 hours – 40 hours = 15 Overtime pay: 55 hours – 40 hours = 15 hourshours

15 hours x $10.15 x 1.5 = $112.5015 hours x $10.15 x 1.5 = $112.50

Overtime (continued)Overtime (continued)

Regular time pay + Overtime pay = Gross Regular time pay + Overtime pay = Gross PayPay

$406 + $112.50 = $518.50$406 + $112.50 = $518.50

See other example on page 203See other example on page 203

Overtime practice problemOvertime practice problem

Alex worked 72 hours this week and gets Alex worked 72 hours this week and gets paid $8.25 an hour. Calculate her gross paid $8.25 an hour. Calculate her gross pay.pay.

SolutionSolution

1.1. Calculate regular timeCalculate regular time• 40 x $8.25 = $33040 x $8.25 = $330

2.2. Calculate overtime payCalculate overtime pay• 72 total hours – 40 regular time = 32 72 total hours – 40 regular time = 32

overtime hoursovertime hours• 32 x $8.25 x 1.5 = $39632 x $8.25 x 1.5 = $396

3.3. Add the twoAdd the two• 330 + 396 = $726330 + 396 = $726

Double timeDouble time

A perk of some jobsA perk of some jobsGiven for special working conditionsGiven for special working conditions

Hours worked x Hourly wage x 2Hours worked x Hourly wage x 2

Double Time ExampleDouble Time Example

Jan had to work 10 hours on Christmas day. Jan had to work 10 hours on Christmas day. She makes $12.00/hour. Assuming she She makes $12.00/hour. Assuming she gets double time for working on Christmas, gets double time for working on Christmas, calculate her gross pay.calculate her gross pay.

10 hours x $12 an hour x 2 = $24010 hours x $12 an hour x 2 = $240

(See example on page 203)(See example on page 203)

Double time practice problemDouble time practice problem

George worked 60 hours this week. For George worked 60 hours this week. For working 5 hours on the 4working 5 hours on the 4thth of July, George of July, George gets double time. George makes $9 an gets double time. George makes $9 an hour. Calculate his gross pay for the week.hour. Calculate his gross pay for the week.

SolutionSolution

1.1. Calculate regular time payCalculate regular time pay• 40 x $9 = $36040 x $9 = $360

2.2. Calculate overtime payCalculate overtime pay• 60 total – 40 regular – 5 double = 15 60 total – 40 regular – 5 double = 15

overtime hoursovertime hours• 15 x $9 x 1.5 = $202.5015 x $9 x 1.5 = $202.50

3.3. Calculate double time payCalculate double time pay• 5 x $9 x 2 = $905 x $9 x 2 = $90

Solution (cont.)Solution (cont.)

Add up the three:Add up the three:

$360 + $202.50 + $90 = $652.50$360 + $202.50 + $90 = $652.50

SalarySalary

Set amount you are paid regardless of Set amount you are paid regardless of how many hours you work.how many hours you work.

Divide yearly salary by how many Divide yearly salary by how many paychecks per year (See chart on pg. 202)paychecks per year (See chart on pg. 202)

Example:Example:

Alice is salaried at $35,000 per year. If she Alice is salaried at $35,000 per year. If she gets paid weekly, what is her gross pay?gets paid weekly, what is her gross pay?

$35,000 / 52 weeks per year = $673.08$35,000 / 52 weeks per year = $673.08

(See example on page 208)(See example on page 208)

Salary practice problemSalary practice problem

Mark is salaried at $36,000 per year. If he Mark is salaried at $36,000 per year. If he gets paid semi-monthly, what is his gross gets paid semi-monthly, what is his gross pay?pay?

SolutionSolution

$36,000 / 24 paychecks a year = $1,500$36,000 / 24 paychecks a year = $1,500

Salary plus commissionSalary plus commission

Combine a set salary with a performance Combine a set salary with a performance based systembased system

Formula for commission:Formula for commission:

(Sales – Quota – Returned Merchandise) (Sales – Quota – Returned Merchandise) x Commission Percentagex Commission Percentage

Salary + Commission = Gross PaySalary + Commission = Gross Pay

(See example on page 208)(See example on page 208)

Salary + Commission ExampleSalary + Commission Example

Melissa receives $200 per week for salary Melissa receives $200 per week for salary as a sales associate. Her quota is $1,000 as a sales associate. Her quota is $1,000 and her commission percentage is 7%. and her commission percentage is 7%. This week, Melissa sold $12,000 in This week, Melissa sold $12,000 in merchandise, $500 of which was returned. merchandise, $500 of which was returned. Calculate her gross pay.Calculate her gross pay.

SolutionSolution

($12,000 - $1,000 - $500) x 7% = $735($12,000 - $1,000 - $500) x 7% = $735

$735 + $200 = $935$735 + $200 = $935

PieceworkPiecework

Based on some performance criteriaBased on some performance criteriaVaries from situation to situationVaries from situation to situation

Example:Example:Josh cuts tobacco. He gets paid $0.15 per Josh cuts tobacco. He gets paid $0.15 per

stick. If Josh cut 1,800 sticks today, what stick. If Josh cut 1,800 sticks today, what is his gross pay?is his gross pay?

1,800 x $0.15 = $2701,800 x $0.15 = $270(See page 209)(See page 209)

Piecework Practice ProblemPiecework Practice Problem

Marcie gathers golf balls at a miniature golf Marcie gathers golf balls at a miniature golf course. She gets $0.15 per ball. Today, course. She gets $0.15 per ball. Today, she gathered 182 balls. What’s her gross she gathered 182 balls. What’s her gross pay? pay?

SolutionSolution

182 x $0.15 = $27.30182 x $0.15 = $27.30