How to Calculate an Hourly Pay Rate

Written by grace ferguson
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How to Calculate an Hourly Pay Rate
Federal minimum-wage law applies to workers who are paid hourly. (Worker image by Catabu from Fotolia.com)

Under the Fair Labor Standards Act (FLSA), employers are required to pay hourly nonexempt workers no less than the federal minimum wage for hours worked up to 40 in the workweek. As of July 24, 2009, the federal minimum wage was £4.70 per hour. Furthermore, the employer must pay hours worked above 40 in the workweek at the employee's overtime rate of one and a half times his hourly pay rate. Nonexempt hourly workers are those that are paid on an hourly basis and qualify for overtime and minimum wage. The employer must consider these factors when calculating the hourly pay rate.

Skill level:
Moderately Challenging

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Instructions

  1. 1

    Calculate the regular hourly pay rate. This rate is the hourly rate you agreed to pay the employee for hours worked. To arrive at the employee's gross wages, multiply the hours worked in the pay period by the regular pay rate.

    For instance, say the employee earns £6.0 an hour and works 70 hours in the biweekly pay period (two weeks).

    Calculation: £6.0 x 70 hours = £420.80 (gross biweekly pay).

    Subtract deductions, such as taxes and health benefits, from gross wages to arrive at the net pay.

  2. 2

    Figure the overtime pay rate. For instance, the employee works 46 hours in the weekly pay period and earns £6.0 an hour. Pay 40 hours at his regular hourly rate.

    Overtime calculation: 6 hours x £9.0 ($9.25 x 1.5) = £54.10 (gross overtime pay).

  3. 3

    Calculate benefit days at the hourly pay rate. Specifically, these are paid holidays, vacation and sick days, and personal days, paid at the employee's base hourly rate.

Tips and warnings

  • The FLSA authorises minimum-wage standards for youths. The law permits employers to pay employees under 20 a minimum wage of £2.70 or more during the first 90 calendar days of employment. Furthermore, vocational education students; full-time students employed by agricultural, higher education or retail establishments; and individuals whose earnings capability are affected by a physical or mental impairment can be paid at rates below the federal minimum wage.

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