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This article was co-written by Michael R. Lewis. Michael R. Lewis is a retired Texas executive, entrepreneur and investment advisor. He has over 40 years of experience in Business & Finance, including the position of Vice President of Blue Cross Blue Shield of Texas. He holds a BBA in Industrial Management from the University of Texas at Austin.
This article has been viewed 10,408 times.
In general, it is quite easy to calculate wages for employees according to the ratio; Usually, you just need to determine what percentage of the regular pay period the employee worked and paid the appropriate amount. Both pay-by-day and percent-of-payroll methods are subject to US federal law. [1] X Source of Study The results would be the same if workers received weekly wages, and often very close if workers received monthly wages.
Steps
Method of payment by day
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Determine the annual salary before tax. Start with the employee’s official annual salary. Taxes are not taken into account at this step; they will be deducted at the end of this section.
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Divide the annual salary by the number of weeks worked in the year. This is the amount the employee receives in a week. Use the annual salary before taxes and deductions.
- For employees who work all year, the working time is 52 weeks.
- For example, an employee earns $30,000 a year; 1 week earnings will be 30,000 ÷ 52 = $576.92.
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Divide your weekly salary by the number of working days in the week. This is the daily wage, or the worker’s daily earnings.
- Continuing the example above, an employee with a weekly wage of $576.92 works 5 days a week. This person’s daily salary is 576.92 ÷ 5 = 115.38 dollars. “
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Multiply the above result by the number of working days. Calculate the number of days worked by the worker in the pay period for which you are rate. Multiply them by the number of daily wages you calculated above.
- In our example, if the employee worked 3 days during the prorated period, his or her salary would be 115.38 x 3 = $346.14.
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Regular tax deduction. Don’t forget that prorated wage payments are charged as usual as taxable wages. This means you’ll need to deduct a percentage of your income for taxes, just like a regular paycheck. If the employee has a retirement account or other special deduction, you need to account for these deductions as well.
- If you work in the US, see our article on federal tax withholding for more information. Additional state taxes may also apply.
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Compensation for ex-employees during unused leave. If an employee leaves the company for vacation or sick leave, the employer is still required to pay the employee during this period according to the law. Use the same method to calculate the amount due each day.
- If the employee like the example above has 6 days of leave, she should be paid an additional $115.38 (daily wage) for each day, or a total of 115.38 x 6 = $692.28 la.
- Deduct tax from this amount.
Payment period percentage method
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Write down the employee’s annual salary before taxes. This is the first step in figuring out how much money the worker earns during the employment period. [2] X Source of Research Use official salary, not amount received after taxes.
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Find out how much is earned each pay period. This is the amount the employee receives each pay period. If you don’t have this information available, calculate based on what workers would normally receive:
- Monthly salary → divide annual salary by 12
- Twice a month → divide by 24 .
- Every 2 weeks → divide by 26 .
- Weekly → divide by 52 .
- For example, a worker has an income of $50,000 and receives a monthly salary of 50,000 ÷ 12 = $4,166.67.
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Calculate the ratio of the number of days worked during the period of pay. Let’s look at the specific pay period that you are divided and calculate as follows:
- Enter the number of days the employee worked (with the salary you are calculating).
- Divide the number of working days in that pay period . Calculate carefully. Don’t assume that each pay period has the same number of working days. [3] X Research Sources
- For example, a worker only works for 14 days in September while normally he works for 22 days. His working days ratio will be 14 / 22 .
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Multiply this ratio by the amount paid each period. This calculation will tell you exactly how much you will have to pay your employees.
- For example, an employee who was paid $4,166.67 per month but worked only 14 days instead of 22 in September would receive the following wage breakdown: 4,166.67 x 14 / 22 = $2,651.52.
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Tax deduction. Calculate any income taxes, retirement deductions, and other specific deductions you would normally charge that employee.
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Pay employees for sick leave and travel leave. In these cases, the employer is usually required to pay cash for any time off that the employee has not used as required by law. [4] X The research source pays workers the usual wage for this period using the same method and rate as above.
- For example, if the employee in the above example has 7 cumulative paid vacation days, he will be paid an additional amount of 4,166.67 x 7 / 22 = $1,325.76.
- This compensation is also taxed like regular wages. [5] X Research Sources
Advice
- For hourly workers, you don’t need to use the above method. Simply multiply the hourly rate by the number of hours worked during the pay period. Hourly wages for employees are also tax-deductible as usual.
- The amount of salary paid for overtime work is also calculated in the same way as the rate payment method as above.
- Don’t forget that many states have their own wage/income tax regulations in addition to federal law. When prorated wages are taxed, you’ll also need to deduct these to determine the amount paid to the employee.
Warning
- In the US, a salaried worker can only be prorated under specific conditions, most commonly when employment begins or ends in the middle of a pay period. You cannot reduce their wages because of reduced hours.
- Employers may end up in court choosing a lower payment method. [6] X Research Source It is best to use a method for all workers who are paid proportionally.
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This article was co-written by Michael R. Lewis. Michael R. Lewis is a retired Texas executive, entrepreneur and investment advisor. He has over 40 years of experience in Business & Finance, including the position of Vice President of Blue Cross Blue Shield of Texas. He holds a BBA in Industrial Management from the University of Texas at Austin.
This article has been viewed 10,408 times.
In general, it is quite easy to calculate wages for employees according to the ratio; Usually, you just need to determine what percentage of the regular pay period the employee worked and paid the appropriate amount. Both pay-by-day and percent-of-payroll methods are subject to US federal law. [1] X Source of Study The results would be the same if workers received weekly wages, and often very close if workers received monthly wages.
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