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02

VIEWS: 6 PAGES: 22

									      CHAPTER 2

COMPUTING & PAYING
  WAGES AND SALARIES


           Developed by Lisa Swallow, CPA CMA MS
  Fair Labor Standards Act
 FLSA - Federal Wage & Hour Law provides for two types of
  coverage
 Enterprise Coverage
   All EE of interstate commerce
    And $500,000 or more annual gross sales
 Individual Coverage
   EE whose company may not meet enterprise coverage, but are
      in fringe occupation are covered individually (for example
      packaging)
                           plus many nonprofits

 All companies in manufacturing or personal care ARE covered!
 Many family businesses are exempt!
   FLSA & Domestic Help

Domestic help includes nannies,
 gardeners, chauffeurs, etc..
These employees must earn minimum
 wage and overtime if they:
  work more than 8 hours/week or
  earn $1000 in a calendar year
“Live-in” help need not be paid overtime
    What is Minimum Wage?
 Includes all rates of pay including, but not limited to:
     Commissions
     Bonuses
     On-call or differential pay
     FMV of lodging/meals


 Exceptions to minimum wage –
     FT students employed at their own university - 85%
     Student learners at Vocational Technical school - 75%
     Retail or farms employing FT students - 85%
     Physically or mentally impaired employees with certification
    Tipped Employees
Anyone averaging $30/month is a “tipped employee”
This is FLSA, not state law
Small Business Job Protection Act froze minimum tipped wages
 at $2.13/hour, but EE still must make $5.15/hour when
 combining tips/wages (5.15 x 40 = $206 minimum gross)
$(5.15 -2.13) x 40 = $120.80/week (must make in tips)
Tips for 40-hour work week
   #1. Reported tips = $43
   Is $85.20 + $43 > $206
   No - ($206 - 43 = $163) so ER must pay additional ($163 - 85.20)
   #2. Reported tips = $1189
   Is $85.20 + $1189 > $206
   Yes so ER pays $85.20
   #3. Reported tips = $111
   Is $85.20 + 111 > $206
   No - ($206 - 111 = $95) so ER must pay additional ($95 - 85.20)
            40 Hour Work Week

 Established by corporate policy (for example 12:01 a.m. Saturday -
  11:59 p.m. Friday)
 FLSA doesn’t require OT for 8+ hour days but for 40+ hour weeks,
  although some states require daily overtime over 8 hours
 FLSA sets OT at 1.5 times regular pay
       Exception 1   -   Hospital EE, overtime for 80+ hours in 14 days
       Exception 2   -   EE receiving remedial education
       Exception 3   -   State/federal government agencies
       Exception 4   -   Union mandate
 Emergency public safety EE - can accumulate 320 hrs x 1.5 = 480
  hours compensatory time instead of OT
 EE of state or interstate governmental agency – can accumulate
  160 x 1.5 = 240 hours compensatory time instead of OT
  Exempt vs. Nonexempt

     Putting someone on salary doesn’t mean they’re exempt!!
    “Exempt” means exempt from overtime provisions of FLSA
 1. Executives
    discretionary power
    nonexempt work cannot exceed 20%
    minimum $250/week
 2. Professional
    education
    minimum $250/week
    intellectual work
    uses independent judgment
 3. Administrative
    discretionary work
    minimum $250/week
 4. Outside sales
    primary sales work is away from the employer’s place of business
                 Child Labor Laws

 Under age 16 cannot work in construction, mining, manufacturing, etc.
 Under age 18 cannot work around hazardous materials
 Under 16 years old limited to employment in retail and food service:
    only 7 a.m. - 7 p.m. (until 9 p.m. allowed in summer)
    3 hours per day - 18 hours per week – school year
    8 hours per day - 40 hours per week – summer


 In agricultural occupations an employee as young as 10 can work
    only from 6/1 - 10/15
    subject to many strict limitations
    violations can result in up to $10,000/offense
    ER needs to have certificate of age on file
  Compensable vs.
Noncompensable Time
Travel (when part of principal workday) is
 compensable
Training (when for ER benefit/required) is
 compensable
Rest periods under 20 minutes are compensable
Prep at work station (but not clothes changing,
 shower) is compensable
FLSA does not require:
  Pay on holidays, vacation, sick, extra on
   weekends
  Pay while waiting to check in/out of plant or for
   paycheck
        How Wages are Paid

 1.   Check
       Many companies keep a separate operating account
       Write a check from the regular account to a payroll account for net
        amount
       Easier to reconcile when payroll checks are written against one
        account


 2.   EFT
       Electronic Funds Transfer
       Disk with data to bank goes through ACH (Automated Clearing
        House)
       Employees receive “stub” or statement showing gross pay and
        deductions and net amount deposited to account
                Timekeeping
 FLSA requires employers to retain time/pay records
 Employer in traditional office environment can use:
   Time sheet
   Time cards
   Computerized time/attendance records
      card-generated systems (computerized totals)
      badge systems (microchips or bar codes)
      cardless/badgeless system - EE enters PIN
 Employer in nontraditional office environment can use:
   Touch screen technology (PC screen reads touch input)
   Internet
   Biometrics - computer reads eye scan, fingerprint or some other
     unique characteristic to ensure security
                Pay Periods

Biweekly (26) - same hours each pay period
Semi-monthly (24) - different hours each pay
 period
Monthly (12) - different hours each pay period

Weekly (52) - same hours each pay period
   ER can have different pay periods for different groups within same
                                company!
   Steps to Follow when
  Calculating Gross Pay

Annualize Salary
Calculate “regular” gross
Calculate hourly pay
Calculate OT rate (1.5 x hourly rate)
Add overtime pay to “regular” gross
   Examples - Calculating
    Gross Paycheck (#1)

     FACTS: Salary quoted is $1,500/month - paid
      weekly - 43 hours in one pay period


$1,500 x 12 = $18,000 annual
$18,000/52 = $346.15 weekly gross
$346.15/40 hours = $8.65 regular rate
$8.65 x 1.5 = $12.98 OT rate
($12.98 x 3) + $346.15 = $385.09 gross
     Practice Calculating
     Gross Paycheck (#2)
     FACTS: Salary quoted is $2,000/month - paid
     semi monthly - 4 hours OT in one pay period


$2,000 x 12 = $24,000 annual
$24,000/24 = $1,000 semimonthly gross
$24,000/52 = $461.54
$461.54/40 = $11.54 regular rate
$11.54 x 1.5 = $17.31 OT rate
($1,000) + ($17.31 x 4) = $1,069.24 gross
      Practice Calculating
      Gross Paycheck (#3)
      FACTS: Salary quoted is $2,000/month for 38 hour work
       week - paid semimonthly.
      OT - regular pay between 38-40 hours/week; 1.5 after 40.
       Of 16 hours of OT in one pay period only 12 over 40

 $2,000 x 12 = $24,000 annual
 $24,000/24 = $1,000 semimonthly gross
 $24,000/ (38 x 52)* = $12.15 regular rate
 $12.15 x 1.5 = $18.23 OT rate
 $1,000 + (4 x $12.15) + (12 x $18.23) = $1267.36 gross

 *Denominator is always number of hours in full time
      year - may be different between companies
       Practice Calculating
       Gross Paycheck (#4)
FACTS: Salary quoted is $1,600/month for 35 hour work week -
  paid semimonthly. OT - regular hourly pay between 35-40
  hours/week; 1.5 after 40 hours. Of 16 hours of OT in one pay
  period, 6 hours are over 40 hours weekly


 $1,600 x 12 = $19,200 annual gross
 $19,200/24 = $800 semimonthly gross
 $19,200/(35 hours x 52 weeks) = $10.55 regular rate
 $10.55 x 1.5 = $15.83 OT rate
 $800 + ($10.55 x 10) + ($15.83 x 6) = $1000.48 gross
     Practice Calculating
     Gross Paycheck (#5)

      FACTS: Salary quoted is $2,200/month -
   paid biweekly - 11.5 hours OT in one pay period


 $2,200 x 12 = $26,400 annual
 $26,400/26 = $1,015.38 each biweekly pay period
 $26,400/2080 = $12.69 regular rate
 $12.69 x 1.5 = $19.04 OT rate
 $1,015.38 + (11.5 x $19.04) = $1,234.34 gross
                      Piece Rate

 FLSA requires piecework earners to get paid for
  nonproductive time
 Must equal minimum wage with OT calculated one of
  two ways:
Method 1
    units produced x unit piece rate = piece rate earnings
    piece rate earnings/total hours = hourly rate
    hourly rate x 1/2 = OT premium
    piece rate earnings + (OT premium x OT hours) = gross pay
                                   or
Method 2
    (units produced in 40 hours x piece rate) +
     (units produced in OT) x (1.5)(piece rate)
         Practice Calculating
            Piece Rate (#1)

FACTS: 4,812 units inspected in a 47.25 hour week
  (600 of those units produced in extra hours).
  Employee is paid .12/each. Calculate using both
  methods.

Method 1
   (4,812 x .12) = 577.44 regular piece rate earnings
   577.44/47.25 = $12.22 hourly rate
   $12.22 x .5 = $6.11 OT premium
   $577.44 + ($6.11 x 7.25 hrs.) = $621.74 gross


Method 2
 (4,212 x .12) + (600 x [.12][1.5]) = $613.44 gross
           Practice Calculating
              Piece Rate (#2)

Facts: Inspection rate = $.08/unit. An EE inspected
  6897 u. in 43.5 hours. She inspected 423 of these in
  overtime. Calculate using both methods.

Method 1
   (6897 units x .08) = $551.76 regular piece rate earnings
   $551.76/43.5 hours = $12.68 hourly rate
   $12.68 x .5 = $6.34 OT premium
   $551.76 + (6.34 x 3.5) = $573.95 gross


Method 2
 (6474 x .08) + (423 x .12) = $568.68 gross
           Commission
 Commission can be used in many combinations
  (with base salary or stand alone) - as long as
  minimum wage provisions are met
 For example: Sam sold $40,000 of product. His
  quota is $31,500. He gets 2% in excess of
  quota. His annual base salary is $30,000. He
  gets paid biweekly - calculate gross paycheck:
  $30,000/26 = $1153.85 base earnings
  (8500 x .02) = $170 commission
  $1153.85 + 170.00 = $1323.85 gross

								
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