Hourly employees are paid according to their time card information.
Unlike salaried employees who are paid a set income each payday, hourly employees are paid according to hours worked. Further, while most salaried employees are exempt from overtime, hourly employees generally qualify for overtime. Calculating an hourly payroll is more complicated than preparing a salaried payroll because it involves calculating or verifying employee time cards. The payroll representative must consider additional factors when calculating payroll hours.
Instructions
1. Round time card minutes from one to seven down to the nearest quarter hour. Round minutes from eight to 14 up to the nearest quarter hour. For example, round 8:09 a.m. up to 8:15 a.m. If you use a computerized timekeeping and payroll system, it rounds the employee's time up and down automatically. All you have to do is ensure the time is correct and make the necessary edits.
2. Calculate hours worked for each day. Pay the employee for short breaks lasting between five and 20 minutes. Do not pay her for lunch periods lasting a minimum of 30 minutes.
3. Add up the hours for each day to arrive at the total hours for the week.
4. Pay work hours up to 40 for the week at the employee's regular pay rate, which can be no less than the federal or state minimum wage, whichever is higher.
5. Pay work hours exceeding 40 for the week at the employee's overtime rate of 1.5 times his regular pay rate. Check your state labor department's overtime laws, which might require overtime for work hours up to a certain amount for the day and, in some cases, double-time payment.
6. Subtract pretax deductions, such as a traditional 401k plan, and nontaxable benefits from the employee's gross pay, if applicable.
7. Withhold applicable payroll taxes. Use Internal Revenue Service Circular E and the employee's W-4 to determine federal income tax withholding. Calculate Medicare tax at 1.45 percent of all of the employee's wages, and Social Security tax at 4.2 percent up to $106,800 for the year (for 2011). Use your state revenue agency's guidelines for state income tax withholding. If local income tax applies, use your city tax assessor's or municipality's withholding procedures; your state revenue agency might have this information.
8. Deduct wage garnishment, if applicable. Under federal law, you can withhold no more than 25 percent of an employee's weekly disposable income for ordinary wage garnishments. You can deduct up to 50 or 60 percent for child support. Check your state law for its garnishment limit, which might be lower than federal law allows.
9. Deduct post-tax voluntary deductions, such as Roth 401k, or taxable benefits, if applicable. The remainder of the employee's pay represents her net wages.
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