Question
Your tech company is doing very well and growing at a steady pace including hiring new employees. During part of the new hire orientation you must help employees understand how their payroll check is calculated. The new employee's salary is $40,000 annually.
Step 1: Payroll Information >> Your payroll spreadsheet should include formulas for the following:
Employee's gross pay
Employee's payroll deductions
Employee's net pay
Step 1: Payroll Information >> Your payroll spreadsheet should include formulas for the following:
Employee's gross pay
Employee's payroll deductions
Employee's net pay
Answers
GPT-4o mini
To help the new employees understand how their payroll check is calculated and to create a payroll spreadsheet with the necessary formulas, follow these steps:
### Payroll Spreadsheet Setup
**Assumptions:**
- The annual salary is $40,000.
- We will consider the following common deductions as examples:
- Federal Income Tax: 15%
- Social Security Tax: 6.2%
- Medicare Tax: 1.45%
- State Income Tax: 5% (variable based on the state, use 5% for this example)
### Spreadsheet Layout
| A | B |
|-----------------------|------------|
| **Description** | **Amount** |
| Annual Salary | $40,000 |
| Gross Pay (Monthly) | =B2/12 |
| Federal Tax Deduction | =B4*15% |
| Social Security Deduction | =B4*6.2% |
| Medicare Deduction | =B4*1.45% |
| State Tax Deduction | =B4*5% |
| Total Deductions | =B6+B7+B8+B9 |
| Net Pay (Monthly) | =B4-B10 |
### Explanation of Each Calculation
1. **Annual Salary (B2)**: Enter the fixed annual salary.
- Example: 40000
2. **Gross Pay (Monthly) (B4)**: Calculate by dividing the annual salary by 12 months.
- Formula: `=B2/12`
- Result: 3333.33
3. **Federal Tax Deduction (B6)**: Calculate based on the gross monthly pay.
- Formula: `=B4*15%`
- Result: 500.00
4. **Social Security Deduction (B7)**: Calculate using the Social Security rate.
- Formula: `=B4*6.2%`
- Result: 206.67
5. **Medicare Deduction (B8)**: Calculate using the Medicare rate.
- Formula: `=B4*1.45%`
- Result: 48.33
6. **State Tax Deduction (B9)**: Calculate using the state tax rate.
- Formula: `=B4*5%`
- Result: 166.67
7. **Total Deductions (B10)**: Sum of all deductions calculated.
- Formula: `=B6+B7+B8+B9`
- Result: 921.67
8. **Net Pay (Monthly) (B11)**: Calculate by subtracting total deductions from gross pay.
- Formula: `=B4-B10`
- Result: 2411.66
### Final Padding for Clarity:
Your resulting spreadsheet should look like this filled out with the formulas where applicable. Replace B2 with the cell where the annual salary is stored.
### Example Calculated Summarized View:
| A | B |
|-----------------------|------------|
| **Description** | **Amount** |
| Annual Salary | $40,000 |
| Gross Pay (Monthly) | $3,333.33 |
| Federal Tax Deduction | $500.00 |
| Social Security Deduction | $206.67 |
| Medicare Deduction | $48.33 |
| State Tax Deduction | $166.67 |
| Total Deductions | $921.67 |
| **Net Pay (Monthly)** | **$2,411.66** |
This layout and the associated formulas help new employees see clearly how their pay is calculated and provides a transparent view of their deductions.
### Payroll Spreadsheet Setup
**Assumptions:**
- The annual salary is $40,000.
- We will consider the following common deductions as examples:
- Federal Income Tax: 15%
- Social Security Tax: 6.2%
- Medicare Tax: 1.45%
- State Income Tax: 5% (variable based on the state, use 5% for this example)
### Spreadsheet Layout
| A | B |
|-----------------------|------------|
| **Description** | **Amount** |
| Annual Salary | $40,000 |
| Gross Pay (Monthly) | =B2/12 |
| Federal Tax Deduction | =B4*15% |
| Social Security Deduction | =B4*6.2% |
| Medicare Deduction | =B4*1.45% |
| State Tax Deduction | =B4*5% |
| Total Deductions | =B6+B7+B8+B9 |
| Net Pay (Monthly) | =B4-B10 |
### Explanation of Each Calculation
1. **Annual Salary (B2)**: Enter the fixed annual salary.
- Example: 40000
2. **Gross Pay (Monthly) (B4)**: Calculate by dividing the annual salary by 12 months.
- Formula: `=B2/12`
- Result: 3333.33
3. **Federal Tax Deduction (B6)**: Calculate based on the gross monthly pay.
- Formula: `=B4*15%`
- Result: 500.00
4. **Social Security Deduction (B7)**: Calculate using the Social Security rate.
- Formula: `=B4*6.2%`
- Result: 206.67
5. **Medicare Deduction (B8)**: Calculate using the Medicare rate.
- Formula: `=B4*1.45%`
- Result: 48.33
6. **State Tax Deduction (B9)**: Calculate using the state tax rate.
- Formula: `=B4*5%`
- Result: 166.67
7. **Total Deductions (B10)**: Sum of all deductions calculated.
- Formula: `=B6+B7+B8+B9`
- Result: 921.67
8. **Net Pay (Monthly) (B11)**: Calculate by subtracting total deductions from gross pay.
- Formula: `=B4-B10`
- Result: 2411.66
### Final Padding for Clarity:
Your resulting spreadsheet should look like this filled out with the formulas where applicable. Replace B2 with the cell where the annual salary is stored.
### Example Calculated Summarized View:
| A | B |
|-----------------------|------------|
| **Description** | **Amount** |
| Annual Salary | $40,000 |
| Gross Pay (Monthly) | $3,333.33 |
| Federal Tax Deduction | $500.00 |
| Social Security Deduction | $206.67 |
| Medicare Deduction | $48.33 |
| State Tax Deduction | $166.67 |
| Total Deductions | $921.67 |
| **Net Pay (Monthly)** | **$2,411.66** |
This layout and the associated formulas help new employees see clearly how their pay is calculated and provides a transparent view of their deductions.