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.

Payroll Register

The example above is from Work Together 13-3. Match the numbers above with instructions below to learn how to complete a payroll register.

  1. 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.
  2. 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.
  3. 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.
  4. 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.
  5. 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.
  6. 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.
  7. 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.
  8. 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.
  9. 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.
  10. 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).
  11. 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).
  12. 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 column blank.
  13. 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.

Employee Earnings Record

Follow the steps below as they correspond to the numbers above to complete WT 13-3:

  1. 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 30.
  2. 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.
  3. 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.
  4. 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.

ASSIGNMENTS

  1. WT 13-3 (self-check)
  2. OYO 13-3 (self-check)
  3. Application 13-3
  4. Application 13-4
  5. Begin Mastery 13-6

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