Payroll Calculations. March 4. So That s How It Works! A hands-on experience in performing payroll calculations.

Transcription

1 Payroll Calculations March A hands-on experience in performing payroll calculations. So That s How It Works!

2

3 Contents Annual Contract Calculations... 1 Payoff Calculations... 3 Late Start / Returning LOA Calculations... 5 Promotion / Demotion Calculations... 7 Net Pay Calculations... 9 Dual Job Calculations Gross Up Calculations Accrual Calculations Statutory Minimum Calculations TRS Federal Fund / Private Grant and TRS Care Calculations TRS Entity Calculations for TRS-Care, New Members & Retirees TRS On-Behalf Calculations Examples used in this booklet are shown using the TRS and IRS rates for effective January 1, 2010.

4

5 Annual Contract Calculations By annual contract calculations we mean the beginning of the year calculations. Whether using the next year payroll or position management, this is how contracts are figured. Example Anne will be hired as a teacher working 187 days at a daily rate of $200 paid out over 12 months: Daily Rate = $200 Nbr Payments = 12 Annual Contract = $37,400 = daily rate x nbr days Contract Balance = $37,400 = annual contract Monthly Rate = $ = annual contract / nbr payments Example Now let s take Anne and give her 10 extra days and a flat rate stipend of $3000: Daily Rate = $200 Nbr Payments = 12 Annual Contract = $42,400 = daily rate x nbr days + stipend ($200x ) Contract Balance = $42,400 = annual contract Monthly Rate = $ = annual contract / nbr payments Adjusted Daily Rate = $ = annual contract / nbr days ($42,400 / 197) o The adjusted daily rate includes the flat rate stipend to make the math come out right Dock Rate = depends o If the stipend is for a job that you consider to be an everyday job then you will include it in the dock rate = $ Career Ladder Department Head Athletic Coordinator o If the stipend is for a job that is not worked every day, then you will not include it = $200 Tennis Coach Senior Class Sponsor 1

6 THIS PAGE LEFT INTENTIONALLY BLANK 2

7 Payoff Calculations A payoff calculation is very much the same as the annual calculation. The only thing that is different is we need to know how many days they actually worked, how much of the extra days or flat rate stipend they will earn and how much they ve been paid. The calculation is the same whether the employee is terminating their employment or going on an unpaid leave of absence. Example Jim only worked 100 of the 187 days ($200 daily rate). He will earn all 10 of the extra days but only ½ of the flat rate stipend of $3000. He has been paid $17, of salary. Daily Rate = $200 Adjusted Annual Contract = $23,500 = daily rate x nbr days + stipend ($200x ) Contract Balance = $5, = adjusted annual contract salary paid Leave Leave earned and used can also play a part in the payoff calculation. We have to determine if the employee should be docked on this last pay check for any used but unearned leave. Example We just found that Jim has used 5 of his 5 state days. Since he has only worked 100 days, he has only earned 3 of those days. Daily Rate = $200 Adjusted Annual Contract = $23,100 = daily rate x nbr days + stipend unearned days used ($200x x$200) o Contract Balance = $5, = adjusted annual contract salary paid ($23,100 - $17,666.65) 3

8 Docks There are two different thoughts on how to calculate the salary for an employee who has already been docked. For this discussion, we ll have Jim again working the 100 days from Aug 10 through Jan 30 but he was out for 10 days from Oct He was docked for 5 but only earned 3. He earned 10 extra days and a$1500 flat rate stipend. Ignore the Dock Amount One way is to completely ignore any amounts that were docked. Daily Rate = $200 Nbr Days = 110 Adjusted Annual Contract = $23,100 = daily rate x nbr days + stipend unearned days used ($200x x $200) o Contract Balance = $5, = adjusted annual contract salary paid (all salary) ($23,100 - $17,666.65) The calculation is exactly the same. Since the 5 days were already docked we don t have to take them into account of the 100 days worked. When you include those days in the total number of days worked, then the salary paid amount needs to be the standard gross also ignoring the dock amount. Include the Dock Amount Some people like to know about the dock and use all actuals: actual days worked and actual monies paid. Daily Rate = $200 Nbr WORKED days = 103 = 100 contract days 7 days unpaid/unearned + 10 extra days Adjusted Annual Contract = $22,100 = daily rate x nbr days + stipend ($200x ) Contract Balance = $5, = adjusted annual contract salary paid (salary minus dock) ($22,100 - $16,666.65) 4

9 Late Start / Returning LOA Calculations For late starters, we advise a calculation that does not over annualize their pay. By over annualize we mean that they cannot receive a pay rate that is more than what they would make if they had worked the whole year. Example You have hired Paul as a teacher effective September 6 th. Since you pay on the 15 th of each month, he has missed the cut-off for the first pay check. Paul makes $200 per day and will work 172 days this year. First we will go through the annual calculation: Daily Rate: $200 Nbr Days: 172 Nbr Payments: 11 Annual Contract: $34,400 Contract Balance: $34,400 Monthly Rate: $ So far so good, but let s compare that to his fellow teachers: Daily Rate: $200 Nbr Days: 187 Nbr Payments: 12 Annual Contract: $37,400 Contract Balance: $37,400 (1) Monthly Rate: $ (2) Now why should Paul, who started the year late even, get paid more than everyone else? Also, let s say salaries are frozen next year and he will earn the same $200 per day. He will see a REDUCTION in pay! Try explaining that one next year! What we want to do is reduce Paul s monthly rate to $ and give him a catch up amount of $ This catch up amount can be calculated by: Paul s Contract Balance: $34, Other s Contract Balance: $34, (37,400 (1) (2) ) Difference: $ It is entirely up to you as to when you want to pay this catch up amount. Some people pay with the first pay check and others pay at the end of the payout. If you decide to pay the $ supplemental pay prior to the last pay check, then you will want to update the contract balance to be $34, (34, ) so as not to pay it again. 5

10 Example Now back on Page 3, Jim left after working 100 days. He was actually on an unpaid leave of absence and he has now returned with 50 days left in the school year. He will be making the same base daily rate of $200. What should his record look like now? Daily Rate: $200 Nbr Days: 150 Nbr Pymts: 5 Annual Contract: $33,500 = previous pay off balance plus returning balance Contract Balance: $10,000 = returning balance (50 x $200) Monthly Rate: $2,000 = returning balance / number of payments 6

11 Promotion / Demotion Calculations Let s work on the fun one first: Spike was just promoted! He moved from Attendance Secretary to Principal s Secretary right before the winter break. We were actually told in January in time for the January payroll so he has 8 payments left. The pay information is as follows: Attendance Secretary Days: 80 Rate: $93.50 Paid: $5, Principal s Secretary Days: 120 of 202 Rate: $ st let s come up with an annual salary: old job + new job Old: 80 x $93.50 = New: 120 x $95.87 = 11, New Annual: $18, nd - Contract Balance = $18, $ = $13, Now, just like a late starter, where does he compare with all other Principal s Secretaries and/or no raise next year? Annual salary = $95.87 x 202 days = $19, Monthly rate = $19, / 12 = $ Spike s monthly rate = $13, / 8 = $ TOO HIGH! Spike should get a supplement amount of $ Annualized Monthly Rate = times 8 remaining payments = $12, Spike s contract balance = $13, which is $ more than everyone else Monthly Rate: $ Nbr Pymts: 8 Annl Contract: $18, Cont Balance: $13, or $12, if supplement paid first 7

12 Demotions work the same way only there usually is not a supplement to be paid. Example Little did we know that Spike was actually trading jobs with Nancy because the Principal doesn t like her. So she will be moving from the principal s secretary to the attendance secretary. Principal s Secretary Days: 85 Rate: $95.87 Paid: $ Attendance Secretary Days: 100 of 187 Rate: $ st let s come up with an annual salary: old job + new job Old: 85 x $95.87 = New: 100 x $93.50 = New Annual: $17, nd - Contract Balance = $17, $ = $11, Now let s compare her monthly salary to everyone else Annual salary = $93.50 x 187 days = $17, Monthly rate = $17, / 12 = $ Nancy s monthly rate = $11, / 8 = $ OK! Monthly Rate: $ Nbr Pymts: 8 Annl Contract: $17, Cont Balance: $11,

13 Net Pay Calculations Explaining the amount an employee sees deposited in their bank account is an easy task if you begin with gross wages and work your way down to net pay. 1. Gross Pay = Contract Pay + Supplemental Pay - Absence Deductions + Absence Deduction Refunds 2. Federal Taxable Gross = Gross pay TRS Deposit (6.4% only) - Annuity deductions Cafeteria 125 deduction + Cafeteria 125 refunds 3. Medicare Tax = (Gross Cafeteria 125 deduction + Cafeteria 125 refunds) x 1.45%, Federal Income Tax = Taxable Gross Allowances on W-4 x Amount per Withholding Allowances in Circular E = Wages subject to income tax. Find taxable wage on the appropriate table in Circular E to determine the amount of tax- Social Security Tax - (GrossPay Nontaxable Supplements Cafeteria 125 deduction + Cafeteria 125 refunds) x 6.2%, TRS Deposit = (Gross Pay NonTRS Supplements) x 6.4%, TRS Insurance (Gross Pay NonTRS Supplements) x.65% 4. Net Pay= Gross Pay + Nontaxable Supplements + Advanced Earned Income Credit FIT Medicare Tax Social Security Tax TRS Deposit TRS Insurance- Employee Deductions + Deduction Refunds 9

14 We have all been confused at one point or another by an employee s net pay. As long as you can verify the TRS eligibility and taxability of the wages and have the right percentages you should be able to match net pay without any problems. Example Allison Pennywise is on Monthly Payroll with W-4 Information: Married with 2 dependents. Contract Pay: $ Non TRS Supplemental Pay: $ Absence Deduction: $ Employee Deduction: Annuity: $ Vision: $12.50 Health: $ (cafeteria 125 plan) Taxable Gross = $ $ $ $ $ $ $ ($ $ x 6.4%) FIT = $ Amount of wages after subtracting withholding allowances: $ $608.34(withholding allowance 2 x ) = $ Look up $ in the table to find the correct line of: Over $2042 but not over $6313: withhold $89.60 plus 15% of excess over $2042, so - $ $ = $ $ x 15% = $ $ $30.73 = $ Medicare Tax = $48.53 ($ $ $ $150.00) X 1.45% TRS Deposit = $ ($ $253.00) x 6.4% TRS Insurance = $19.48 Deductions = $ Gross Pay: $3, FIT: $ Medicare Tax: $48.53 TRS Deposit: $ TRS Insurance: $19.48 Deductions: $ Net Pay: $

15 Dual Job Calculations As you know, overtime is calculated based on a regular rate, which is always an hourly rate. For employees who are earning only one rate of pay per hour, you don t need to do any calculation at all to find the regular rate: That hourly wage IS the regular rate, and you pay 1.5 times that amount for all hours over 40 in a workweek. But for non-exempt employees who earn two (or more) rates of pay for doing different jobs, employers must use a specific computation for determining the regular rate. This computation, which is actually quite simple, consists of totaling the straight time earnings at each rate of pay during the workweek, and then dividing that amount by the number of hours worked in the workweek. The result, which is called the weighted average, becomes the employee s regular rate for the week, and you must pay an additional.5 times that rate for all overtime hours worked that week. For example, if an employee works 16 hours at $10.00 per hour and 30 hours at $12.00 per hour, the total straight time amount earned is $ That amount is then divided by the total number of hours the employee worked (46) resulting in a weighted average hourly rate of $ Since the employer has already paid the straight time rate for all 46 hours worked, only an additional half-time (.5) of the weighted average is due for the six overtime hours. So the calculation goes like this: $11.30 (the regular rate) X.5 = $5.65. Thus, $5.65 is the half-time rate. $5.65 X 6 hours of overtime = $ That is the amount of overtime owed to the employee for the workweek. Therefore, the total wages earned for the 46 hours, including the six overtime hours, is $ (the straight-time pay) plus $33.91(the overtime pay) for a total of $ Another method for calculating overtime on an employee with dual jobs is for the employee and employer to agree, preferably in writing, in advance of the employee performing any work, that he or she will receive overtime at a rate not less than one and one-half times the hourly non-overtime rate applicable for the type of work performed during each overtime hour. So, overtime for work paid regularly at $15.00/hour will equal $ Overtime for work paid regularly at $21.00/hour will equal $ Under this method, employees must carefully track the type of work they are performing during each overtime hour worked. 11

16 THIS PAGE LEFT INTENTIONALLY BLANK 12

17 Gross Up Calculations Bonuses given to every employee of a district, yes some districts still give bonuses, can be calculated using the equation below. A few questions need to be considered by the district before these checks can be issued. First, will this bonus be non taxable, will taxes be paid at the bonus rate of 25%, or will each employee be taxed at according to their current W-4 form? Second, will TRS be paid at the normal 7.05% rate? Once you understand which taxes are applicable you can easily come up with the gross amount for each employee. The following example is using the 25% FIT rate and is not TRS eligible. Desired net pay divide by (1 minus all tax rates combined) If the desired net pay is $1,000 then 1,000/1-(FIT + Med) 1,000/1-(25% %) 1,000/ ,000/.7355 Gross pay = $1, Prove Gross pay $1, Less: FIT@ 25 % = Med@ 1.45% = Net Pay = $1,000 If you choose to pay FIT for each individual at the rate on their W-4 you would use the Circular E to calculate their individual rates. If the pay is TRS eligible the retirement deposit of 6.4% would not be included when you calculate FIT. 13

18 THIS PAGE LEFT INTENTIONALLY BLANK 14

19 Accrual Calculations Contrary to popular belief, accruals are easy! Accrual = Earned Paid To work out the accrued pay, let s look at Johnny. Johnny is a high school math teacher. He is employed under a 187-day contract which runs from Aug 10 to May 31 for a total contract salary of $36,000. His daily rate is $ He will receive 12 payroll checks with the first coming in September although he worked 15 days in August. Accruals can be viewed in a table format as follows: Pay Date Days Worked Salary Earned Salary Paid Pay Period Accrual YTD Accrual Accrual Rate x Days Worked Earned Paid Previous Pay Period Accrual + Pay Period Accrual Aug Now what can get confusing is what makes up the accrual rate. The accrual rate should be the annual gross pay distribution totals divided by the total number of days worked. If we look to September, the calculations will be: Pay Date Days Worked Salary Earned Salary Paid Accrual Rate x Days Worked Pay Period Accrual Earned Paid YTD Accrual Previous Pay Period Accrual + Pay Period Accrual Aug Sep Salary Earned = 20 x $ = $ Salary Paid = $36,000 / 12 = $ Pay Period Accrual = $ $ = YTD Accrual = $ $ = $ A negative pay period accrual amount means that the employee is being paid MORE than they are earning that month. Now let s fill out the rest of the year! 15

20 Pay Date Days Worked Salary Earned Salary Paid Accrual Rate x Days Worked Pay Period Accrual Earned Paid YTD Accrual Previous Pay Period Accrual + Pay Period Accrual Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Now let s say Johnny overused his leave in February and was docked $ How do we account for that? We change the number of days worked for him! Take the $500 dock and divide by the accrual rate to come up with 2.60 days. Reduce the February days by 2.60 to get 17.4 days earned for Johnny. Remember, also, that the salary paid will be $500 less than normal. Pay Date Days Worked Salary Earned Salary Paid Accrual Rate x Days Worked Pay Period Accrual Earned Paid YTD Accrual Previous Pay Period Accrual + Pay Period Accrual Jan Feb Absence refunds actually add days to the days worked and the rest of the calculation is the same. 16

21 Statutory Minimum Calculations TRS Payroll Manual The purpose of the Statutory Minimum Report is to report on a monthly basis the total amount of salary paid above the adjusted state minimum salary and the total amount of employer contributions due to TRS. There are 2 groups of employees that are to be reported: Members employed as teachers, full-time librarians, counselors and nurses, and Members who would have been entitled to the state minimum salary under former Section , Education Code, as that section existed on January 1, Superintendent Educational Diagnostician Instructional / Admin Officer Physical Therapist Administrative Officer Occupational Therapist Principal (part-time, full-time, or assistant) Physician, M.D. School Social Worker Psychological Associate Bachelor s or Master s Degree Psychologist Special Education Related Service Personnel Bachelor s or Master s Degree Payments Examples to Include Examples to Exclude Stipends for sponsorships Payments that are a wholly separate job UIL activities Driving a school bus Coaching Duties Maintenance/custodial work Tutorial assignments Teaching summer school If you answer YES to any one of the following questions, then it is probable that the additional duties are part of the duties of the particular job subject to the State Minimum Salary Schedule and do not constitute a wholly separate job. Therefore, include the salary paid for the additional duties in adjusted TRS salary. 1. Are the additional duties required of the person because the person has a job that is subject to the State Minimum Salary Schedule? 2. Are the additional duties contained in the same written contract or oral agreement or in an amendment to that contract or agreement by which the person was originally employed in a job that is subject to the State Minimum Salary Schedule? 3. Are the additional duties customarily or exclusively assigned to or performed by a person having a job that is subject to the State Minimum Salary Schedule? 4. Are the additional duties so closely related to the job held by the person subject to the State Minimum Salary Schedule that it is unreasonable to think of them as standing alone as a separate job independent of the primary job? 5. Are the additional duties conditions upon the person having a job subject to the State Minimum Salary Schedule? If the source of funding for the employee s salary is 100% federal, the employee will NOT be listed on the Statutory Minimum Report. 17

22 The calculation is a 4 step process. Before beginning, you need to know IF you are required to submit the Statutory Minimum Report, the Cost Education Index for your district, and have the current year s State Minimum Salary Schedule. Step 1. Calculate the pay period rate of State Minimum Salary by taking the annual amount from the schedule (using the applicable schedule and step) and dividing it by the number of annual payments. Annual State Minimum Salary / number of annual payments = State Minimum Salary Step 2. Calculate the Adjusted State Minimum Salary by reducing the amount from Step 1 by any absence deduction the employee may have then multiplying it by the CEI. State Minimum Salary (reduced by any dock amount) x CEI = Adjusted State Minimum Salary Step 3. Calculate the employee s TRS Salary by adding all payments that are NOT wholly separate and reducing by any dock amount then subtract the amount from Step 2 to get the Salary Paid Above Adjusted State Minimum Salary. TRS Gross Adjusted State Minimum Salary = Salary Paid Above Adjusted State Minimum Salary Step 4. Calculate the Reporting Entity Contribution by multiplying the amount from Step 3 by the Sate Contribution Rate for local fund amount. Salary Paid Above Adjusted State Minimum Salary x State Contribution Rate = Reporting Entity Contribution Local Fund(s) Only A 10-month teacher on Step 4 (minimum $30,320) is hired for 187 days at a salary of $35,000 to be paid over 12 months (pay rate = $ ). The CEI is Step 1-Monthly State Minimum Salary = $30,320 / 12 = $ Step 2-Adjusted State Minimum Salary = $ x 1.11 = $ Step 3-Salary Paid Above Adjusted State Minimum Salary = $ $ = $ Step 4-Reporting Entity Contribution = $ x 6.644% = $ % Local 75% Federal with Federal Salary Less than Adjusted State Minimum A 10-month teacher on Step 4 (minimum $30,320) is hired for 187 days at a salary of $35,000 to be paid over 12 months (pay rate = $ ). The CEI is Step 1-Monthly State Minimum Salary = $30,320 / 12 = $ Step 2-Adjusted State Minimum Salary = $ x 1.11 = $ Step 3-Salary Paid Above Adjusted State Minimum Salary = $ $ = $ Step 4-Reporting Entity Contribution = $ x 6.644% = $7.45 Federal 75% of $ is $ which is less than Step 2 Adj State Min so all $ of Step 3 is local 5% Local 95% Federal with Federal Salary Greater than the Adjusted State Minimum A 10-month teacher on Step 4 (minimum $30,320) is hired for 187 days at a salary of $36,000 to be paid over 12 months (pay rate = $ ). The CEI is Step 1-Monthly State Minimum Salary = $30,320 / 12 = $ Step 2-Adjusted State Minimum Salary = $ x 1.11 = $ Step 3-Salary Paid Above Adjusted State Minimum Salary = $ $ = $ Step 4-Reporting Entity Contribution = $ x 6.644% = $99.66 Federal 95% of $ is $ which is greater than Step 2 Adj State Min so local amount will be $ federal $2850 minus Step 2 $ = $45.40 then Step 3 $ federal $45.40 = $150 local 18

23 TRS Federal Fund / Private Grant and TRS Care Calculations TRS Payroll Manual Federal Grant Report (TRS 3) The purpose of the Federal Fund/Private Grant Report is to report on a monthly basis the total amount of salary paid from federal funds and private grants to TRS eligible employees and to reimburse the State for the State contribution due on the salary. Federal Grant TRS-Care Report (TRS 489) The purpose of the Federal Grant TRS-Care Report is to report on a monthly basis the total amount of salary paid from federal funds and private grants to TRS eligible employees and to reimburse the State for the State's contribution to the Texas Public School Retired Employees Group Insurance Program (TRS- Care). Child nutrition retirement contributions can be determined using one of three methods: Completion of Sections I and II of Form 154 using the standard labor cost percentage of 35%, or Completion of Sections I, II and III of Form 154 using the district's labor cost percentage in lieu of the standard 35%, or 6.644% / 1% of total salaries paid to food service employees in lieu of using Form 154. All other federal fund or private grant contributions are computed at 6.644% for Federal Grant Report and 1% for Federal Grant TRS-Care Report of TRS eligible salary. If an employee is a retiree, there is no matching contribution. 19

24 THIS PAGE LEFT INTENTIONALLY BLANK 20

25 TRS Entity Calculations for TRS-Care, New Members & Retirees Entity TRS-Care TRS wages x 0.55% New Members These are employees that are either new to TRS membership or returning to TRS membership after withdrawing their deposits and closing their accounts. Reporting entities are now required to pay the state contribution of 6.644% for new members in their first 90 days of employment. You must submit employer payments to TRS on compensation paid to an employee for the entire pay period that contains the 1 st day of employee's eligibility for membership through the entire pay period that contains the 90 th day of employee's eligibility for membership. New members will not show up on the following reports: Federal Fund / Private Grant Report and Statutory Minimum Report. Retiree Pension Surcharge All retirees are subject to the % surcharge with the following exceptions: retiree reported only as a substitute, or retirement date is prior to September 1, 2005, or retiree does not meet the requirements for TRS membership (i.e. part-time, irregular, seasonal, temporary). Retiree TRS-Care Surcharge All retirees are subject to the TRS-Care Employer Surcharge with the following exceptions: retiree reported only as a substitute, or retirement date is prior to September 1, 2005, or retiree does not meet the requirements for TRS membership (i.e. part-time, irregular, seasonal, temporary), or retiree is not covered by TRS-Care. Retirees should complete Form 667 Employer Health Benefit Surcharge and the district use the resultant amount for every month where at least one day is worked. 21

26 THIS PAGE LEFT INTENTIONALLY BLANK 22

27 TRS On-Behalf Calculations FAR Guide Employees of a school district that are eligible for teacher retirement have a percentage of their salaries withheld to be paid to TRS. In addition, the state pays matching funds to the TRS on behalf of the employees. This matching amount needs to be calculated and recorded by the district. The calculation is as follows: 1. sum the employee salaries subject to TRS (ALL salaries) 2. multiply the total TRS salaries paid by the state TRS matching rate (6.644% + 1% = 7.644%) 3. subtract TRS 373 Statutory Minimum payments 4. subtract TRS 3 Federal Fund/ Private Grant Report payments 5. subtract TRS 489 Federal Grant TRS-Care Report payments 6. subtract TRS New Member payments 7. subtract Entity TRS Care payments 23

28 THIS PAGE LEFT INTENTIONALLY BLANK 24