An employee earns $20 per hour and 1.75 times that rate for all hours in excess of 40 hours per week. Assume that the employee worked 55 hours during the week, and that the gross pay prior to the current week totaled $29,000. Assume further that the social security tax rate was 6.0%, the Medicare tax rate was 1.5%, and federal income tax to be withheld was $30
To calculate the employee's gross pay for the current week, we need to consider two different rates of payment: the regular rate ($20 per hour) and the overtime rate (1.75 times the regular rate).
First, we will calculate the employee's earnings for the regular hours worked (up to 40 hours):
Regular pay = Regular rate × Regular hours
Regular pay = $20/hour × 40 hours
Regular pay = $800
Next, we need to calculate the overtime earnings for the additional hours worked (above 40 hours):
Overtime pay = Overtime rate × Overtime hours
Overtime rate = 1.75 × Regular rate
Overtime rate = 1.75 × $20/hour
Overtime rate = $35/hour
Overtime pay = Overtime rate × Overtime hours
Overtime pay = $35/hour × (55 hours - 40 hours)
Overtime pay = $35/hour × 15 hours
Overtime pay = $525
Now, we can calculate the employee's total gross pay:
Total gross pay = Regular pay + Overtime pay
Total gross pay = $800 + $525
Total gross pay = $1,325
To calculate the employee's net pay (after deductions), we need to consider the social security tax, Medicare tax, and federal income tax:
Social security tax = Social security tax rate × Total gross pay
Social security tax = 6.0% × $1,325
Social security tax = $79.50
Medicare tax = Medicare tax rate × Total gross pay
Medicare tax = 1.5% × $1,325
Medicare tax = $19.88
Federal income tax = $30 (given)
Net pay = Total gross pay - (Social security tax + Medicare tax + Federal income tax)
Net pay = $1,325 - ($79.50 + $19.88 + $30)
Net pay = $1,325 - $129.38
Net pay = $1,195.62
Therefore, the employee's net pay for the current week would be $1,195.62.