Page 140 - Essentials of Payroll: Management and Accounting

Compensation
piece-rate pay, which is $31.50 (42 dolls x $0.75 piece rate). The
employer then calculates the overtime due by calculating the standard
wage rate during the regular period, which was $6 per hour ($240 total
pay/40 hours), resulting in a premium of $3 per hour. The employee’s

overtime pay is therefore $15 ($3 overtime premium x 5 hours).
The employer could also have simply set the piece rate 50 percent
higher for work performed during the overtime period, which would
have been $1.13 ($0.75 x 1.5). In this example, the higher piece rate
would have resulted in a slightly higher payment to the employee, since
the person produced slightly more than the standard number of dolls
during the period.

Paying Salaries for Partial Periods
Many salaried employees begin or stop work partway through a pay
period, so the payroll staff must calculate what proportion of their
salary has been earned. This calculation also must be done when a pay
change has been made that is effective as of a date partway through the
person’s pay period.
To determine the amount of a partial payment, calculate the

salaried employee’s hourly rate, then multiply this rate by the number
of hours worked.A common approach for determining the hourly rate
is to divide the total annual salary by 2,080 hours, which is the total
number of work hours in a year.
Example. The Pembrose Company pays its employees on the fif-
teenth and last day of each month, which amounts to 24 pay periods
per year. One employee, Stephanie Ortiz, has been hired partway

through a pay period at an annual salary of $38,500. She starts work on
the twentieth of the month, and there are seven business days left in the
pay period. The payroll staff first determines her hourly rate of pay,
which is $38,500/2,080 hours, or $18.51. They then calculate the

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