DO NOW

If you were the owner of a small business, how much would you pay your workers to work overtime? Why?

What are some methods you would take to keep track of hours worked by employees?

Payrollin'

PREPARING PAYROLL RECORDSChapter 12

12-1: PREPARING PAYROLL TIME CARDS Many businesses pay employees for number of hours each employee has

worked Salary: money paid for employee services

Pay period: period covered by a salary payment Employees paid every week, every two weeks, twice per month, or once per

month Usually paid on the 15th and last day of each month

Payroll: total amount earned by all employees for a pay period Reduced by state and federal taxes and other deductions, such as health

insurance Used to prepare payroll reports for the government

12-1: PREPARING PAYROLL TIME CARDS Time cards used by those who aren’t paid a salary

Requires employees to record total hours worked each day by checking in at arrival and departure

Page 341 shows example of time card Rounded to nearest quarter-hour

Total earnings: total pay due for pay period before deductions Also referred to as gross pay/gross earnings

Overtime pay includes “time-and-a-half” Hourly wage x 1.5 Add to regular work day compensation to receive total compensation for day

12-1: PREPARING PAYROLL TIME CARDSPractice:

Complete WT 12-1 Complete OYO12-2Be prepared to review answers

12-2: DETERMINING PAYROLL TAX WITHHOLDING How some view Social Security...

Payroll taxes: taxes based on payroll of a business

Businesses required by law to withhold payroll taxes from employee salaries

Federal and state governments charge businesses penalties for failure to pay correct payroll taxes when due

Payroll taxes represent liability for employer until payment is made to government

12-2: DETERMINING PAYROLL TAX WITHHOLDING Amount of income tax withheld is identified on Form W-4, Employer’s

Withholding Allowance Certificate Withholding allowance: deduction from total earnings for each person legally

supported by taxpayer, including employee

Employers hold W-4 for each employee

Larger number of withholding allowances claimed, smaller amount of income tax withheld Turn & Talk: Why would married individuals or those with children be taxed less

than those without any dependents or spouse?

12-2: DETERMINING PAYROLL TAX WITHHOLDING Exemption from withholding available for some low-income and part-time

employees

Cannot claim exemption if:1. Income exceeds $750 and includes more than $250 unearned income2. Another person can claim them as a dependent on their tax return

IRS tables – pages 347 - 348

12-2: DETERMINING PAYROLL TAX WITHHOLDING Federal Insurance Contributions Act (FICA) provides for federal system of

old-age, survivors, disability, and hospital insurance

Social security tax: federal tax paid for old-age, survivors, and disability insurance Calculated on employee earnings up to maximum paid in calendar year tax base: maximum amount of earnings on which tax is calculated $87,000 for Social Security Tax, as 6.2%

Medicare tax: federal tax paid for hospital insurance Not tax base exists here Calculate don total employee earnings, at a rate of 1.45%

12-2: DETERMINING PAYROLL TAX WITHHOLDINGPractice:

Complete WT 12-2Complete OYO 12-2Be ready to review answers

EXIT SLIP

Why do you think taxes would be higher in some states than others?

Think about the use of tax dollars paid to the government…

DO NOW In your notebooks:

What is the sole purpose of savings accounts?

What is the sole purpose of checking accounts?

Do you have a checking account? If so, how do you deposit money into your account?

CAROUSEL 3 stations

3-4 people each station

Team rotates after 2 minutes

Station 1: What is the difference between gross pay and net pay? What does it mean when something is “tax-deductible”?

Station 2: What is direct deposit? How is it more efficient than using paper checks?

Station 3: If you owned a business, what methods would you use to keep track of how much each employee has earned during employment with your business?

12-3: PREPARING PAYROLL RECORDS Payroll register: business form used to record payroll information

Shows total earnings, payroll withholdings, and net pay of all employees

Net pay: total earnings paid to employee after payroll taxes and other deductions

Employee earnings record: business form used to record details affecting payments made to employee Business must send quarterly report to federal and state governments showing

employee taxable earnings New earnings record prepared for each employee each quarter

Look Familiar?

12-3: PREPARING PAYROLL RECORDS Total earnings, not net pay, are added to previous accumulated earnings

amount on earnings record

Total earnings is amount compared to tax base to determine whether social security taxes should be withheld

Other column represents amount voluntarily taken from paychecks by employees Charitable contributions Savings/investments

12-3: PREPARING PAYROLL RECORDSIn pairs:

Complete 12-3 Work TogetherComplete 12-3 On Your Own

12-4: PREPARING PAYROLL CHECKS

Check written for total net pay, which is taken out of

general checking account

Net pay amount

deposited into special payroll

checking account

Individual checks written to employees from special

payroll checking account

12-4: PREPARING PAYROLL CHECKS Amount of check is total Net Pay column of payroll register (excel)

Check payable to Payroll Account #, the business’ special payroll checking account (given in problem to you)

Payment for payroll period is the given two-week period (given in problem to you)

Using separate checking account for payroll checks provides internal control and helps prevent fraud

12-4: PREPARING PAYROLL CHECKS Information used to prepare payroll

checks is taken from payroll register (excel)

Special payroll check form used that has detachable stub for recording earnings and amounts deducted (in WP, similar to chapter 5)

Employees keep stubs for record of deductions and cash received

DIRECT DEPOSIT:PROS & CONS

Read the following articleAs you do so, write down pros and cons to direct deposit with your partner

12-4: PREPARING PAYROLL CHECKS Electronic funds transfer (ETF): computerized cash payments system that

transfers funds without use of checks, currency, or other paper documents

Today, most businesses deposit employee net pay directly to each employee bank account using ETF

Payroll must still be calculated, but individual checks are not written and do not have to be distributed

Each employee receives statement of earnings and deductions similar to detachable stub on payroll check

12-4: PREPARING PAYROLL CHECKSIn pairs:

Complete 12-4 Work TogetherComplete 12-4 On Your Own

EXIT SLIP

If/when you have a part-time job, will you be more likely to use direct deposit via EFT, or are you more comfortable receiving a paper check?

Why or why not?