Unit 4: PayrollSection 4.1: Gross Earnings

Unit 4.1 Vocabulary1. Base salary2. Commission3. Commission

employees4. Double Time5. Gross Pay6. Hourly employees7. Overtime8. Piece rate

9. Piecework employees

10.Quota11.Salaried

employees12.Salary plus

commission basis13.Straight

commission14.Time and a Half

Gross Pay (also called Gross Earnings)The amount of money an employee earns before taxes

and other deductions are taken out of his or her paycheck

Ewww! Gross!

Salaried EmployeesEmployees that earn an annual wage no matter how

many hours were spent working or how much output the employees produce.

Note: These employees are generally professionals. That means they have earned an advanced degree (college, university, or postsecondary institution) or have highly specialized skills. Examples?

Doctor

AccountantTeacherAthlete

Salaried Employees:Do not receive extra pay for late hours worked at the

office.Do not receive extra pay for working at home to

meet a deadline or prepare for a meeting.Do not receive extra pay for coming in on weekends

or holidays.But also do not lose salary if they miss a

reasonable number of days due to sickness or a family emergency.

Examples - SalariesFelipe is a salaried employee that earns an

annual income of $46,500.00 What is his monthly income?

Carmen is a pediatrician and earns an annual income of $117,600.00. What is her monthly income?

46,500 12 = $3,875

Note: Divide by 12 since there are 12 months in the year.

117,600 12 = $9,800

Hourly employeesEmployees that are paid a set rate per hour, and then

paid for the number of hours they work.

Working 40 hours per week (8 hours per day for 5 days) is considered Full-Time

If an employee works more than 40 hours per week, he or she will get paid more than their normal hourly rate.

Examples - HourlyLattimer gets paid $9.60 to work part time at

Applebees. He worked 18 hours last week. What were his gross earnings?

Frankie gets paid $8.75 per hour to work at Yankee Candle at the Outlet Mall. He worked 39 hours last week. What were Frankie’s gross earnings?

9.60 18 = $172.80Note: Multiply the number of hours worked by the rate per hour.

8.75 39 = $341.25

OvertimeWhen an employee works more than 40 hours per week.

Time and a halfFor each hour over the forty regular hours, the

employee will get paid 1½ times the regular rate of pay.

Multiply by: 1½

Examples – Time and a HalfLaura gets paid $15.25 per hour as a bank

teller at First Priority Bank. She worked 50 hours last week.How many overtime hours did she work?

What is her time-and-a-half rate of pay?

What is her gross pay?

50 – 40 = 10 overtime hours

15.25 1.5 = $22.88

40 15.25 = $610.0010 22.88 = $228.80

Total: $838.80

Examples – Time and a HalfFrancisco gets paid $13.50 per hour as a

manager at Beef’O’Brady’s. He worked 47 hours last week.How many overtime hours did he work?

What is his time-and-a-half rate of pay?

What is her gross pay?

47 – 40 = 7 overtime hours

13.50 1.5 = $20.25

40 13.50 = $540.007 20.25 = $141.75

Total: $681.75

Special Note:Many times, hourly workers will be paid for

at least ½ hour work. Meaning, if an employee works 6 hours and 13 minutes, he or she will get paid for 6½ hours or if an employee works for 9 hours 48 minutes, he or she will get paid for 10 hours.

So: Round up to the nearest half hour when calculating hours worked.

Double timeOn holidays, overnight trips, or other special occasions,

businesses will sometimes offer to pay employees twice the regular hourly rate.

Multiply by: 2

Piecework employeesEmployees that are paid by the amount of output they create. They receive a specified amount of money for

each unit produced.

The apparel industry typically operates this way. Individuals who can make clothes are paid a certain amount for each

article of clothing they create. The articles are called pieces.

Piece rateThe amount of money an employee earns for producing

each piece of output.

Examples - PieceworkBill works in piecework, creating widgets. He

gets paid $1.25 per widget. Last week he made the following number of widgets: Monday—45, Tuesday—50, Wednesday—48, Thurday—54, and Friday—46 How many widgets did he make last week?

What were Bill’s gross earnings?

45 + 50 + 48 + 54 + 46 = 243 widgets

243 1.25 = $303.75

Examples - PieceworkSandra works part-time cleaning houses. She

charges $15.00 per room she cleans. One week she cleaned the following number of rooms: Monday—3, Tuesday—4, Wednesday—5, Thurday—6, and Friday—7 How many rooms did she clean?

What were Sandra’s gross earnings?

3 + 4 + 5 + 6 + 7 = 25 rooms

25 15.00 = $375.00

Commission employeesEmployees that are paid a specified percent of the sales

they generate.

Examples:

Real Estate Agents

Car Salesmen

Court Attorneys

CommissionA percent of the dollar value of sales.

%%

%

Examples - CommissionRyan Duval is a real estate agent in Beverly

Hills. He makes 12% commission on his houses and he just sold a house for $895,000. What is his gross earnings?

$895,000 0.12 = $107,400

Examples - CommissionLeanne is a real estate agent who earns 15%

on each property she sells. One month she sold a condo worth $56,800, another condo worth $49,000, and a house worth $89,200. Find her gross earnings.

First, add the total value of the properties: 56,800 + 49,000 + 89,200 = 195,000

Next, calculate her commission: 195,000 0.15 = $29,250

Straight commissionA given dollar amount that an employee can earn for

each sale.

For instance, Jim from The Office earns $1,000 for every new account he opens at Dunder-Mifflin Paper Company.

Salary plus commission basisWhen a salesperson gets paid a salary along with a

commission on top of that.

- This means, an employee can make more money if they sell more products, but no matter what, they will at least get paid a certain amount.

Base salaryWhen an employee gets paid on a salary plus

commission basis, the amount they are guaranteed to be paid each week is called the _____________.

Note: The Base salary is usually not very high.

QuotaWhen an employee gets paid on a salary plus

commission basis, once they make sales past a certain point they begin to earn commission. The number of sales they have to make to begin making commission is called the ________________.

Examples - CommissionCarly Christianson sells large appliances at

Best Buy. She earns a salary of $150 per week plus 10% on her appliance sales over her quota of $2,000. Last week she sold $6,750 worth of appliances. Find Carly’s gross earnings for the week. First, find the amount of her sales above quota: 6,750 – 2,000 = $4,750Next, calculate her commission: 4,750 0.10 = $475Finally, add her commission to her base salary: $475 + $150 = $625