How to Calculate Your Employee's Paychecks by Hand

Your employees must get paid for the work they do. Simple as that. Handling payroll differs from company to company, but there are many well-recognized calculation methods. For some small businesses, doing manual calculations is the only option.

Manually calculating an employee’s paycheck is based on whether he or she is salaried or hourly. To determine an hourly employees’ pay by hand, you must examine their time-sheets or punches for a week, or two weeks. To calculate a salaried employees’ pay, you can use an annual salary calculation.

Weekly Calculation

Let’s say your full-time hourly employee, Glenn, makes $15 an hour. You pay him bi-weekly. To measure his pay, your calculation should look like this:

40 hours x 2 = 80 hours. 80 x $15/hour = $1,200. This is his gross pay.

Full-time hourly employees who work more than 40 hours a week must earn overtime. Overtime in the U.S. is equal to one and half times an employee’s regular rate of pay. If Glenn works 50 (or ten extra hours both weeks) hours each week, instead of 40, this is what your calculation should look like:

Pay his regular rate from above, then determine overtime. 10 x 2 = 20 hours. 20 x $22.5/hour (15 x 1.5) = $450. This is also gross pay, albeit overtime

Annual Calculation

Your full-time salaried employee Linda makes $56,000 annually. You pay her semi-monthly (24 pay periods in a year). Determining her pay is a simple calculation, based on your company’s pay schedule. It should look like this:

$56,000 / 24 = $2,333.33. This is her gross pay.

Net Pay

The above scenarios only measure an employee’s gross pay. Once you withhold the proper federal, state, and local taxes, you’ll end up with employees’ net pay. For 2019, an employee’s withholding taxes are:

• A 6.2% Social Security tax on the first $128,700 of wages
• A 1.45% Medicare tax on the first $200,000 of wages
• A 2.35% Medicare tax above $200,000

State and local taxes vary based on your business’s location. To ensure the proper taxes check out our local tax identifier. If you don’t want to manually calculate an employee’s paycheck, test out our payroll modeling calculators.