Learn to correctly process any employee’s paycheck
Businesses often employ both salaried and hourly employees depending on the functions of specific jobs, the need for flexible work schedules and the nature of their industry.
If your company has a combination of hourly and salaried employees, there are a few considerations to take into account when processing their payroll. While they are still subject to the same taxation, their check amounts are often derived differently.
Our company has a vast amount of experience providing payroll services, human resources assistance and other business administration assistance to companies in Dublin, the Bay Area and beyond. Today, we’ll cover some key elements of payroll calculation for hourly and salaried employees to give you a better idea of how to correctly pay people who fall into either category.
We’ll begin with hourly employees, who must clock in and out multiple times per day in order to eventually arrive at a number of hours worked per week which determines their paycheck amount.
The most glaring difference between most hourly and salaried employees is the requirement for overtime pay when an employee works over 40 hours per week.
This payment of 1.5 times their hourly rate applies to each week, not pay period. So, if an employee works 42 hours in a week, they’re due 2 hours of overtime even if you don’t pay weekly. Employers can’t ask an employee to come in fewer hours the next week to avoid paying overtime during the pay period.
Salaried employees have simpler payroll calculations. Since they are not paid based on the number of hours worked per week, in most cases their paychecks are simply derived from their annual salary divided by the number of pay periods.
While the vast majority of salaried employees are not eligible for overtime pay, there are some exceptions to this rule. If an employee makes less than $35,568 per year, does not supervise employees or perform administrative tasks and has job duties similar to those of hourly employees in comparable businesses, they must be paid overtime when they work over 40 hours per week.
This law ensures employers cannot skirt the overtime rules simply by making people work on a salary and asking them to work over 40 hours per week. Any employee who feels they are possibly being taken advantage of by working on salary but working additional hours could have grounds for legal action.
The laws outlined thus far are federal laws, but certain states and even localities can have more stringent laws regarding overtime and which employees can be paid via salary.
Both types of employees still must have the correct taxes withheld based on local, state and federal guidelines and once the correct paycheck amounts are calculated, the process becomes similar in terms of withholding and issuing payments.
If your business is processing payroll in-house, has further questions about payroll processing and/or is looking for a partner to assist with your administrative tasks, we would be happy to consult with you and make a plan to help your business reach its goals.
