During the first week of January, an employee works 45 hours. For this company, workers earn...

During the first week of January, an employee works 45 hours. For this company, workers earn 150% of their regular rate for hours in excess of 40 per week. Her pay rate is $35 per hour, and her wages are subject to no deductions other than FICA Social Security, FICA Medicare, and federal income taxes. The tax rate for Social Security is 6.2% of the first $118,500 earned each calendar year and the FICA tax rate for Medicare is 1.45% of all earnings. The current FUTA tax rate is 0.6%, and the SUTA tax rate is 5.4%. Both unemployment taxes are applied to the first $7,000 of an employee’s pay. The employee has $97 in federal income taxes withheld. What is the amount of this employee’s net pay for the first week of January?

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Expert Solution

Net pay = $1,438.32

Working Note 1 - Calculation of Overtime rate
Normal hourly rate	$35.00
Overtime rate [$35 x 150%]	$52.50

Working Note 2 - Calculation of Gross pay
Hour worked	45
Normal wages:
Normal hours (a)	40
Normal hourly rate (b)	$35.00
Normal wages (c = a x b)	$1,400.00

Overtime wages:
Overtimes hours [45 - 40 hours] (d)	5
Overtime wage rate [Refer working note 1] (e)	$52.50
Overtime wages (f = d x e)	$262.50

Gross pay [Normal wages + Overtime wages = c + f]	$1,662.50

Calculation of Net pay
Gross pay [Refer working note 2]		$1,662.50
Less: payroll deductios:
Income tax	$97.00
Social security tax [$1,662.50 x 6.2%]	$103.08
Medicare tax [$1,662.50 x 1.45%]	$24.11
Total payroll deductions		$224.18
Net pay [Gross pay - payroll deductions]		$1,438.32

ekkarill92 answered 2 years ago

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