Know Itall - BC Bookkeeping Tutorials|dwmbeancounter.com

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Know Itall

Calculating Payroll > Employee Calculations
Knowit All
Knowit All is Ma's only exempt employee and is paid a salary of \$3,000 a month or \$36,000 on an annual basis. In addition to his salary he is also paid a bonus of 1/2 % of monthly sales. During the month he took off one day for vacation.

Since Knowit All is exempt and is paid by the salary method he receives the same for his regular earnings amount regardless of the number of hours worked and is not paid for any overtime.

• Bonus Calculation - Since monthly sales during the current month were \$100,000 his bonus calculation is just a matter of multiplying the monthly sales times his bonus rate.
Bonus = Monthly Sales X Bonus Rate
Bonus = \$100,000 X 1/2 %
Bonus = \$500.00

• Calculate Earnings - So all we need to do is add his salary and bonus for the month in order to calculate his earnings - right ? Yes and no. Because as we stated earlier, Ma wants to keep up with how much holiday, sick time, and vacation time is costing her a year we have to make an additional calculation in order to assign pay to her manager's vacation time.

In order to do this, Ma only uses his regular salary (excludes bonus amounts) to calculate how much to allocate to his vacation time.
Ma converts his salary to an hourly rate by dividing his annual salary by the number of "normal" working hours in a year (2,080 hours).
Hourly Rate = \$36,000 / 2,080 hours
Hourly Rate = \$17.31

Vacation Pay - She then assigns a portion of his salary to vacation time by multiplying his calculated hourly rate times the number of hours of taken off for vacation.
Vacation Time Pay = 8 hours X \$17.31
Vacation Time Pay = \$138.48

Regular Earnings - Knowit All's regular earnings are then calculated by subtracting his vacation time pay from his normal salary for the month.
Regular Earnings = Salary - Vacation Time Pay
Regular Earnings = \$3,000 - 138.48
Regular Earnings = \$2861.52

We're home free now. All we need to do is calculate his total earnings for the month.
Total Earnings = Regular Earnings + Vacation Time Pay + Bonus

Total Earnings = \$ 2,861.52 + 138.48 + 500.00

Total Earnings = \$3,500

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