Employees are paid based on their hourly wage/salary.
The goal of a payroll department is to ensure that employees receive accurate and timely paychecks. Furthermore, the department must pay payroll taxes to the government. To meet these objectives, the payroll staff must apply a number of calculations. Where federal law conflicts with individual state law, the employer must use the law most advantageous to the employee.
Straight-Time Pay
According to the U.S. Department of Labor, employers must pay qualified non-exempt employees at least the federal minimum wage. The Fair Labor Standards Act (FLSA) covers employees who work for companies that conduct interstate commerce and generate at least $500,000 in annual revenue. If the company does not meet the dollar-value minimum, employees are still covered as long as the company engages in interstate commerce. FLSA-covered workers qualify for minimum wage. The federal minimum wage, as of July 24, 2009, was $7.25 per hour.
Regular hours (those under 40) worked are paid at the employee's base pay. For instance, say the employee earns $9.50 per hour and has 35 hours for the workweek.
Calculation: 35 hours x $9.50 = $332.50 gross regular pay.
Overtime Pay
FLSA-covered employees also qualify for overtime pay (hours worked above 40). Typically, hourly workers qualify for overtime pay and salaried workers are exempt. Overtime is paid at the employee's overtime rate--one-and-a-half times (1.5) his regular pay rate. For instance, say he earns $10 per hour and works 50 hours for the workweek. Pay 40 at his regular pay rate.
Overtime Calculation: 10 hours x $15 ($10 x 1.5) = $150 gross overtime pay.
Pay overtime with his regular paycheck.
Salary Pay
Salaried workers are usually paid the same wage each pay date. But when deductions apply, such as when the employee takes more benefit days than allowed, the employer uses either the hourly rate or the daily rate to make the deduction. Note that the calendar year has 2080 work hours for salaried workers, including holidays, for which they are paid. For instance, say the employee earns an annual salary of $37,000, paid biweekly.
Hourly Calculation: $37,000 divided by 2080 hours = $17.79 per hour.
Daily Rate Calculation: $37,000 divided by 26 biweekly pay periods divided by 10 days = $142.31 per day.
Double-Time Pay
The DOL notes that employers are not required to pay double time to employees who work on holidays or weekends; it is a matter between the employer and the worker. If the employer decides to pay double-time pay, it is paid at twice the employee's regular pay rate. For instance, say the employee earns $11 per hour and worked 6 hours on Christmas Day.
Calculation: 6 hours x $22 ($11 x 2) = $132 gross double-time pay.
Wage Garnishments
Title III of the Consumer Credit Protection ACT (CCPA) protects the employee by restricting the amount an employer can garnish from the employee's wages. The employer may garnish the lesser of 25 percent of disposable pay or the total by which the disposable wages are above 30 times the federal minimum wage. Subtract the employee's taxes from his gross compensation to arrive at the disposable income.
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