13-3: Preparing Payroll Records
So far we have learned how to calculate hours worked,
regular earnings, overtime earnings, and taxes (federal withholding,
social security, and medicare). These items will need to be calculated
each pay period for each employee. As an employer, this information
per employee will be summarized in one place, a payroll register.
A payroll register summarizes the payroll for one pay period, shows
total earnings, payroll withholdings, and net pay for all employees.
The example above is from Work Together 13-3. Match
the numbers above with instructions below to learn how to complete
a payroll register.
- One payroll register will be used each payroll
period. The first date listed on the report is the last day of the
pay period being paid. For example, if the current week worked is
February 7 through February 13, the pay period end date would be
February 13. In the textbook, the dates will be provided in the instructions.
For WT 13-3, the pay period end date is July 15, 20xx.
- The date of payment is the date the checks will
be written. Most businesses pay employees later than the period end
date. For example, if the work week was February 7 through February
13, employees would not get paid until a later date. The dates above
were for a Monday through a Sunday. If the business paid the following
Friday, the date of payment would be February 18. Once again, the
date of payment will be provided in the instructions. For WT 13-3,
the date of payment is July 15, 20xx. Use this date, but this example
is not realistic. Most businesses do not pay on the same date
as the last date of the period.
- The information for the employees is taken from
the time cards. For WT 13-3, the employee names, marital status,
and number of allowances is already provided. Notice that the employee
names are listed alphabetically by last name, and the employee
numbers are also in numerical order. That will not always happen.
For this textbook, you will list employees on the payroll register
alphabetically by last name.
- For WT 13-3, the regular earnings and overtime
earnings are already provided. If this information was not provided
on the payroll register, the information would be taken from the
time cards. Add regular earnings to overtime earnings to calculate
total earnings (or gross pay). DO NOT TOTAL COLUMNS AT THIS POINT.
Columns will be totaled when the payroll register is complete.
- Using total earnings, calculate federal withholding
tax. Use the tax tables on pages 318-319 in your textbook. Federal
withholding tax is determined based on marital status, withholding
allowances, and total earnings.
- Social security tax is a percentage of total earnings.
The instructions state the current social security percentage is
6.5%. Formula: Total Earnings X 6.5% = Social Security tax. Round
numbers to the nearest cent.
- Medicare tax is a percentage of total earnings.
The instructions state the current medicare percentage is 1.5%.
Formula: Total Earnings X 1.5% = Medicare tax. Round numbers
to the nearest cent.
- Some businesses provide health insurance benefits
to employees. Some businesses pay the complete portion of health
insurance, while others require the employee(s) to pay part. As an
employee of Beaverton Rural Schools, I pay 20% of my health care
costs and my portion is deducted from my payroll check. The employees
in WT 13-3 also pay part of health care costs. The instructions state
each employee pays $60 for health insurance benefits. Record $60
in the health insurance column for each employee.
- The "Other" column is where the employee can have
other deductions taken out of the payroll check for various reasons.
Each week, I have a portion of my payroll check deducted and sent
to my savings account at the bank. I also have money taken out and
placed in a 403B account (retirement account). I choose to have these
deductions taken out. Any deduction that is not a payroll tax or
health care deduction is listed in the "Other" column. Since many
kinds of deductions can be taken out, each deduction must be noted
with a letter to signify the type of deduction. In our textbook,
there will be two "Other" deductions for employees: Savings Bonds
(B) and United Way (UW) deductions. Any deduction listed in the other
column must have a letter code in parentheses in front of the deduction.
Each of the employees in WT 13-3 have decided to have $15 taken out
for Savings Bonds.
- After all taxes and deductions are listed, the
total deductions must be added together. Add federal withholding,
social security, medicare, health insurance, and other deductions
together to determine the total amount to be deducted from an employee's
total earnings (gross pay).
- The last step per employee is to figure out how
much the employee is to be paid. The amount of the check written
to the employee is Net Pay. Formula: Total Earnings - Total Deductions
= Net Pay. Net Pay (the amount the employee gets to take home).
- Check numbers will be not listed on the payroll
register until the checks are actually written. For WT 13-3,
checks will not be written until a later date. Leave the check number
- After net pay is calculated for each employee,
it is time to total the payroll register. Single rule under all amount
columns. Total all columns. Before double ruling the totals, determine
whether the payroll register is in balance. If the Total Earnings
- Total Deductions = Total Net Pay, the payroll register balances.
Then, double rule the payroll register. Write the word "Totals" on
the same line as the total amounts.
Once a payroll register has been completed for the
pay period, information must be transferred for each employee to an Employee
Earnings Record. An Employee Earnings Record is a record
that details payments made to an employee. By law, each employer must
submit payroll information quarterly to the federal government. This
information is provided so the government knows whether or not the
employer is paying the appropriate tax withheld. Each employee will
have his/her own Employee Earning Record; a new record begins
each quarter for each employee.
Follow the steps below as they correspond
to the numbers above to complete WT 13-3:
- Each employee will have an earnings record for
each quarter. There are four quarters in the year. The date at the
top of the record will list the last date of the current quarter.
Quarters end on the following dates: March 31, June 30, September
30, December 31. Since employees are being paid in July for WT 13-3,
this places the pay period in the third quarter that ends September
- Information about each employee is listed next,
such as the employee's name, social security number, rate of pay,
etc. This information can be obtained from the employee's W-4 form,
the time card, or payroll register. The information for WT 13-3 is
provided in the instructions.
- Next, transfer the information for this employee
from the payroll register. With the exception of Accumulated Earnings,
you are just recording the information previously stated on the payroll
register to a separate record for each employee. The purpose of this
is so that all the information regarding an employee is recorded
in one place, much like posting information to the general ledger
places information about a particular account in one place.
- The accumulated earnings column is the only item
calculated on this record. The accumulated earnings lists the total
earnings the employee has earned year-to-date. The critical part
to remember is that this records TOTAL EARNINGS year-to-date. The
formula to calculate accumulated earnings is: Accumulated earnings
from the prior period + this period's total earnings. In the example
above: $13,520 + $1,079 = $14,599. The biggest mistake that students
make is they want to add net pay to the prior period's accumulated
earnings. Remember that net pay is what the employee takes home,
not what the employee has earned. Lastly, notice this record is not
totaled as of 7/15. This record is only totaled when the quarter
is complete, around September 30.
- WT 13-3 (self-check)
- OYO 13-3 (self-check)
- Application 13-3
- Application 13-4
- Begin Mastery 13-6