ACG 2021 Current Liabilities and Payroll Payroll and Payroll Taxes Payroll refers to the amount paid to employees for the service they provide during a period Liability for Employee Earnings o Salary Refers to payment for managerial administrative or similar services Expressed in terms of month or year o Wages Refers to payment for manual labor Expressed in hours or weekly o Basic salary can increase or decrease because of commissions profit sharing or cost of living adjustments o Some businesses pay managers an annual bonus in addition to salary Based on productivity o Fair Labor Standards Act Requires businesses engaged in interstate commerce to follow the requirements Minimum wage rate 5 85 Overtime 1 for hours over 40 per week Premium rates for overtime or for working at night holidays etc are fairly common but not required by law http www dol gov esa regs compliance whd whdfs2 2 htm Created by M Mari Fall 2007 Page 1 of 2 ACG 2021 Current Liabilities and Payroll Overtime over 40 hours per week are at 1 1 2 times the regular rate Computing Gross Pay Gross pay total earnings of an employee for a payroll period including bonuses and overtime pay Wage employee pay rate x hours worked up to 40 1 5 x pay rate hours over 40 Example 2 Suppose that Sally Money earns a rate of 10 per hour During the past week she worked 48 hours Compute her gross pay pay rate x hrs up to 40 1 5x pay rate actual hrs 40 10 x 40 1 5 x10 48 40 400 120 520 Base wage Created by M Mari Fall 2007 Page 2 of 2 Overtime pay Total earnings GROSS PAY
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