# Fat Chef - BC Bookkeeping Tutorials|dwmbeancounter.com

Title
Go to content

## Fat Chef

Calculating Payroll > Employee Calculations
Fat Chef
Fat Chef is paid by the salary method and his \$700 per week salary is based on working up to 45 hours a week as agreed upon with Ma. If he works less than 45 he is also paid the same amount; however, since he is a nonexempt employee if he works over 40 hours during a pay week he must be paid overtime for all hours worked over 40. Fat Chef is also entitled to a bonus. The law basically requires all types of remuneration to be included in calculating an employee's regular and overtime rates. In our case, we need to include our chef's bonus in our calculations.

• Bonus - Our first step is to calculate Fat Chef's bonus for the two week pay period. Fat Chef's bonus is based on a rate of 1/4 % of the sales during the two week pay period - \$50,000. The sales during the first week were \$23,000 and the sales for the second week were \$27,000. This calculation is simple. Just multiply the bonus rate times the sales for the period.

Bonus 1st Week = Sales X Bonus Rate
Bonus 1st Week = \$23,000 X 1/4 %
Bonus 1st Week = \$57.50
Bonus 2nd Week = Sales X Bonus Rate
Bonus 2nd Week = \$27,000 X 1/4 %
Bonus 2nd Week = \$67.50
Total Bonus = Bonus 1st Week + Bonus 2nd Week
Total Bonus = \$57.50 + 67.50
Total Bonus = \$125.00

• Overtime - In order to calculate what to pay him for any overtime, we first need to calculate what his straight time rate of pay per hour is. We do this by dividing his weekly Salary amount of \$700 a week plus his Bonus for the week by the number of hours his pay is based upon.

Straight Time Rate = (Salary + Bonus) / Hours Salary Based On
Straight Time Rate Per Hour = (\$700 + \$57.50) / 45 hours
Straight Time Rate Per Hour = \$16.83 per hour

• Overtime Rate - Our next step is to calculate what his overtime rate of pay per hour is. Ma pays the required 1 1/2 times the straight time rate for overtime hours. So all we need to do is multiply his straight time rate per hour time 1.5.

Overtime Rate Per Hour = Straight Time Rate Per Hour X 1.5
Overtime Rate Per Hour = \$16.83 x 1.5
Overtime Rate Per Hour = \$25.25

The overtime rate per hour is actually made up of the straight time rate of \$16.83 plus what is often called the premium portion of \$8.42. All we're saying here is that Fat Chef makes an additional \$8.42 an hour when he works overtime. A simple way of determining the premium portion is subtracting the Straight Time Rate Per Hour from the Overtime Rate Per Hour.

Premium Rate Per Hour = Overtime Rate Per Hour - Straight Time Rate Per Hour

Premium Rate Per Hour = \$25.25 - 16.83
Premium Rate Per Hour = \$8.42

• Actual Hours Worked - Next we need to get and review Fat Chef's actually hours worked for each week of his two week payroll period.
Week 1 - 43 hours worked
Week 2 - 42 hours worked

Do we need to pay Fat Chef for any overtime hours for either or both weeks ? We sure do, he worked over 40 hours during both weeks.

Now that we have the rates and hours and bonus, all we need to do is pay Fat Chef his base salary and bonus and pay his overtime hours at his overtime rate of \$25.25 - right ?

Week 1 Calculation:
Base Salary = \$700.00
Bonus For Week = \$57.50
Overtime Hours = Total Hours Worked - 40
Overtime Hours = 43 -40
Overtime Hours = 3
Overtime Pay = Overtime Rate x Overtime Hours
Overtime Pay = \$25.25 x 3
Overtime Pay = \$75.75

Total Pay For Week 1 = Base Salary + Bonus + Overtime Pay
Total Pay For Week 1 = \$700.00 + 57.50 + 75.75
Total Pay For Week = \$833.25

Wrong !
Since Fat Chef's salary is based on a 45 hour work week the calculation of his overtime is a little different. Why ? Because for any overtime hours worked between 40 - 45 hours we have already paid him his straight time rate for up to 5 hours. All we owe him for the overtime hours worked between 40 - 45 hours is the premium portion or \$8.42 per hour to get his pay for these hours up to the \$25.25 overtime rate. What about any overtime hours that exceed 45 hours ? In that case, we would have had to pay any overtime hours that exceeded 45 hours at his full overtime rate of \$25.25.

Note:Salary for Workweek Exceeding 40 Hours:
A fixed salary for a regular workweek longer than 40 hours does not discharge FLSA statutory obligations.

Week 1 Correct Calculation:
Base Salary = \$700.00
Bonus For Week = \$57.50
Overtime Pay
Overtime Hours = Total Hours Worked - 40
Overtime Hours = 43 -40
Overtime Hours = 3
Additional Overtime Pay = 3 x \$8.42
Total Earnings Week 1
Total Week 1 Pay = Base Salary + Bonus + Overtime
Total Week 1 Pay = \$700.00 + 57.50 + 25.26
Total Week 1 Pay = \$782.76

Week 2 Correct Calculation:
Base Salary = \$700.00
Bonus For Week = \$67.50
Straight Time Rate Per Hour = (\$700 + \$67.50) / 45 hours
Straight Time Rate Per Hour = \$17.06 per hour
Overtime Rate Per Hour = Straight Time Rate Per Hour X 1.5
Overtime Rate Per Hour = \$17.06 x 1.5
Overtime Rate Per Hour = \$25.59
Overtime Premium = \$25.59 - 17.06
Overtime Hours = Total Hours Worked - 40
Overtime Hours = 42 -40
Overtime Hours = 2
Additional Overtime Pay = 2 x \$8.53