Under federal law, a nonexempt employee qualifies for overtime pay; nonexempt means that the employee is not exempt from the law's overtime pay provisions. Most nonexempt employees are hourly workers who receive regular wages based on their regular pay rate and overtime wages at their overtime rate. To arrive at an employee's gross pay, figure out the regular, and if applicable, overtime wages. Thereafter, calculate the net pay.
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Multiply the employee's regular work hours for the pay period by the worker's regular pay rate to arrive at the regular gross pay. Regular hours are those worked up to 40 for the week.
Multiply the employee's overtime hours for the pay period by the overtime pay rate to arrive at the overtime gross pay. Overtime hours are work hours that exceed 40 for the week. To arrive at the overtime rate, multiply the employee's regular pay rate by 1.5.
Add the employee's regular gross pay and overtime gross pay together to arrive at the total gross pay for the pay period.
Subtract payroll taxes from the employee's gross pay if there are no pretax deductions, such as a Section 125 medical plan. If there is, subtract the benefit from the gross pay, then withhold payroll taxes. Use the IRS Circular E withholding tax table that matches wages, pay period, filing status and allowances to figure out the federal income tax amount. Obtain the worker's filing status and allowances from the worker's W-4 form. As of 2011, calculate the social security tax at 4.2 per cent of taxable wages (up to £69,420 for the year) and the Medicare tax at 1.45 per cent of all taxable wages. If applicable, apply your state and local revenue agency's guidelines for withholding state and local income taxes.
Subtract wage garnishment, if it applies.
Deduct taxable or post-tax voluntary deductions, if applicable. The rest of the earnings equal the employee's net pay.
Tips and warnings
- Consult your state labour department for applicable state laws. For example, the state might have overtime laws, which require overtime pay if the employee works more than a certain amount of hours for the day.
- Since the more wages the employee earns, the more income taxes paid, if the overtime wages are considerable, you can pay it as a separate check from regular wages to reduce income tax liabilities.
- Although state's vary, overtime wages are generally due on the employee's next regularly scheduled paycheck, at the same time as regular wages.
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