This post will show the different factors affecting salaries and wages. Payroll has been less complicated nowadays due to available payroll applications and services. Companies are even outsourcing their entire payroll system to a third party provider so they don’t have to do the hard work. But for a small to medium business owner, sometimes you have to do payroll yourself or hire somebody to do it for you. You need to make sure that you pay your employees right because accurate and timely payroll is a standard business etiquette. If you are an employee on the other hand, knowing to compute for your salary empowers and informs you financially. After all, it’s good to know where your hard earned money goes and where is it coming from.
Here’s an example of a typical payroll computational format:
Depending on your organization’s policies, the item names may vary but the order is almost always the same. Some details may not be applicable for you but majority of the working population surely can relate. From an accounting perspective, payroll sums all the financial data related to salaries which is usually presented in a payroll report or a payroll sheet. Different payroll software have their own employee databases where records are maintained and payroll preparation is less time consuming.
It may seem basic and routinary at times but payroll presents some given peculiarities. The computation of overtime pay and taxes for different individuals would yield different scenarios and considerations. And this is not just plain accounting for payroll work, you need to be aware also of certain labor law provisions, tax laws and social security laws.
Now let’s put our computation in action. But before we do, let’s have some assumptions about Mr. Mozart.
Work Location: Philippines
Status of Employment: Contractual for 6 months
Salary Bracket: Minimum wage earner at 456 PHP per day
Pay period: July 2013
Days worked: 20 days
Total overtime worked: 10 hours on regular day
Mr. Mozart’s net pay is:
Most factors did not affect Mr. Mozart’s salary. This is how basic at it can get. It all depends on the nature of your company and actual payroll data the employee has acquired for a particular payroll period. For illustration purposes,we only considered the most common addition and deduction.
For a discussion on how to compute overtime pay, see Overtime Pay Computation