Basics Of Payroll System

Explain the importance of accurate payroll records. Compute gross pay using different methods. Explain and compute employee-paid withholdings. Compute net pay. Prepare payroll registers. Explain the methods of distributing payroll funds. Prepare an employee’s earnings record. Define the accounting terms introduced in this chapter.

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What You’ll Learn

Chapter 12 Payroll Accounting

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Shahzad Asghar Arain MIS/GIS Expert 0334-9564004 [email protected]

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Payroll System

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What kinds of earnings might contribute to an employee’s gross earnings?

What Do You Think?

Chapter 12, Section 1 Calculating Gross Earnings

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SECTION 12.1

Shahzad Arain 92-334-9564004 Master Trainer for South Asia .


the two main functions of a payroll system.
the different methods of computing gross pay.

You Will Learn

Gross earnings is the total amount an employee earns in a pay period.

Main Idea

Calculating Gross Earnings

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payroll pay period payroll clerk gross earnings salary wage time card electronic badge readers commission piece rate overtime rate

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Key Terms

Calculating Gross Earnings

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A payroll is a list of employees and payments due to each employee for a specific pay period. Businesses with many employees can have a payroll clerk. A well-designed payroll system achieves the following goals:
The collection and processing of all information needed to prepare and issue payroll checks.
The generation of payroll records needed for accounting purposes and for reporting to government agencies, management, and others.

Using a Payroll System

Calculating Gross Earnings

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The amount of money an employee earns in a pay period is called gross earnings, or gross pay. Employees are grouped into different pay categories to help the employer compute the gross pay:
salary
hourly wage
commission
salary plus commission or bonus
piece rate

Computing Gross Pay

Calculating Gross Earnings

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A common method of paying employees is by salary, a fixed amount of money paid each pay period regardless of the number of hours worked.

Salary

Calculating Gross Earnings

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Another common method of paying employees is the hourly wage, an amount of money paid at a specified rate per hour worked. Employees are sometimes required to use a time card to record hours worked. Some businesses use electronic badge readers to track employees’ work hours.

Hourly Wage

Calculating Gross Earnings

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Sales employees are often paid a commission, a percentage of the employee’s sales.

Commission

Calculating Gross Earnings

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Some sales employees are paid a base salary plus a commission or bonus based on their sales.

Salary Plus Commission or Bonus

Calculating Gross Earnings

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Employees receive piece rate when they are paid for each item they produce.

Piece Rate

Calculating Gross Earnings

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Employers are generally required to pay overtime when employees work more than 40 hours per week. The overtime rate, as set by the Fair Labor Standards Act of 1938, is 1.5 times the employee’s regular pay rate. Salaried employees are sometimes entitled to overtime pay as well.

Overtime Pay

Calculating Gross Earnings

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payroll A list of the employees and the payments due to each employee for a specific pay period.
pay period The amount of time over which an employee is paid.
payroll clerk An employee responsible for preparing the payroll.
gross earnings The total amount of money an employee earns in a pay period; also called gross pay.

Key Terms Review

Calculating Gross Earnings

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salary A fixed amount of money paid to an employee for each pay period.
wage An amount of money paid to an employee at a specified rate per hour worked.
time card A record of the time an employee arrives at work, leaves work, and the total number of hours worked each day.

Key Terms Review

Calculating Gross Earnings

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electronic badge readers An electronic device that scans the magnetic strip containing employee information on an employee’s identification badge and then transfers the information directly to a computer.
commission An amount paid to an employee based on a percentage of the employee’s sales.
piece rate A rate of pay based on the number of items produced.

Key Terms Review

Calculating Gross Earnings

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overtime rate Pay rate employers are required to pay certain employees covered by state and federal laws; the Fair Labor Standards Act of 1938 sets the rate at 1.5 times the regular hourly rate after 40 hours per week.

Key Terms Review

Calculating Gross Earnings

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