Question

How are hourly and salaried gross pay calculated?

Answer 1

Gross pay is the total amount of money earned by an employee before any deductions, such as taxes, insurance, and retirement contributions, are taken out. The calculation of gross pay differs for hourly and salaried employees.

### Hourly Employees

1. **Determine Hourly Wage**: This is the amount paid for each hour worked.

2. **Calculate Total Hours Worked**: This includes all hours for the pay period, including overtime hours if applicable.

3. **Overtime Calculation** (if applicable): In many jurisdictions, employees are entitled to overtime pay for hours worked over 40 in a week, typically at a rate of 1.5 times the hourly wage.

4. **Gross Pay Calculation**:
- For non-overtime hours:
\[
\text{Gross Pay} = \text{Hourly Wage} \times \text{Total Regular Hours}
\]
- For overtime hours:
\[
\text{Gross Pay} = (\text{Hourly Wage} \times \text{Total Regular Hours}) + (\text{Overtime Wage} \times \text{Overtime Hours})
\]
- Overtime Wage is often calculated as:
\[
\text{Overtime Wage} = \text{Hourly Wage} \times 1.5
\]

### Salaried Employees

1. **Determine Annual Salary**: This is the total amount paid to the employee for the year.

2. **Calculate Gross Pay for the Pay Period**: This is typically done on a monthly or biweekly basis.
- For monthly pay:
\[
\text{Gross Pay} = \frac{\text{Annual Salary}}{12}
\]
- For biweekly pay (assumes 26 pay periods in a year):
\[
\text{Gross Pay} = \frac{\text{Annual Salary}}{26}
\]

### Summary
- For **hourly employees**, gross pay is based on the number of hours worked multiplied by the hourly wage, including any applicable overtime multiplier.
- For **salaried employees**, gross pay is a fixed percentage of the annual salary based on the pay period frequency.

It’s important to know local labor laws regarding pay calculations and overtime rules to ensure compliance and accuracy in gross pay calculations.