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Unit 4: PayrollSection 4.1: Gross Earnings
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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
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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!
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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
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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.
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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
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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.
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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
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OvertimeWhen an employee works more than 40 hours per week.
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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
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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
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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
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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.
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Double timeOn holidays, overnight trips, or other special occasions,
businesses will sometimes offer to pay employees twice the regular hourly rate.
Multiply by: 2
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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.
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Piece rateThe amount of money an employee earns for producing
each piece of output.
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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
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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
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Commission employeesEmployees that are paid a specified percent of the sales
they generate.
Examples:
Real Estate Agents
Car Salesmen
Court Attorneys
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CommissionA percent of the dollar value of sales.
%%
%
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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
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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
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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.
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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.
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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.
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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 ________________.
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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