If you need a little extra help running payroll, our calculators are here to help. Double check your calculations for hourly employees, or make sure your salaried employees get the right take home pay. We’ll show you the payroll taxes, overtime rates, and everything else you need to get those paychecks right this time.
In addition to simply crunching the numbers for you, we also want to make sure you understand how writing paychecks can differ for employees who receive a salary and your hourly staffers. Read on for more information and links to other payroll calculators for specific situations (like when you pay a bonus, or when an employee leaves your company).
How is payroll different for hourly and salaried employees?
At the end of the day, the act of running payroll is pretty similar for any type of employee. You just take their gross wages (or how much money they’ve earned in a given pay period) and withhold local, state and federal payroll taxes, plus any additional payroll deductions for things like health benefits, a retirement plan, or garnishments.
The path from gross wages to net wages (or take home pay) doesn’t really change much. The primary difference between payroll for hourly and salaried employees is how you calculate those gross wages in the first place.
Gross wages for hourly employees
For workers whose compensation is based on how much they work, you calculate their gross wages by multiplying the number of hours they worked during a pay period by their hourly pay rate.
It’s pretty straightforward, generally, but a number of states have overtime laws which can increase employees’ pay rate if they work more than a certain number or hours in a day or in a week (typically 8 hours/day or 40 hours/week). Make sure to account for these wrinkles when you calculate paychecks for hourly workers.
Gross wages for salaried employees
For employees who are paid an annual salary, gross pay is calculated by dividing their annual salary by the number of pay periods in a year. For example, if an employee earned an annual salary of $100,000, this is what their gross wages would be for different pay periods (assuming there are no other pre-tax deductions):
|Pay schedule||Gross wages
(based on $100k salary)
|Weekly (52 pay periods/year)||$1923.08|
|Bi-Weekly (26 pay periods/year)||$3846.15|
|Bi-Monthly (24 pay periods/year)||$4166.67|
|Monthly (12 pay periods/year)||$8333.33|
To understand more about choosing different pay schedules, here’s a detailed look at the issue.
Who should be salaried and who should be paid hourly?
When they hire an employee, employers have some discretion to choose who is paid hourly and who is paid a salary. Typically, employees whose hours are fixed (or consistent), and employees at higher compensation levels are offered a salary. Employees at lower compensation levels whose hours are more variable tend to receive an hourly paycheck.
However you choose to handle compensation, there are a few rules that need to be followed — most notably the rules for exempt and non-exempt employees under the Fair Labor Standards Act (FLSA). In a nutshell, the FLSA says that employees should be entitled to overtime pay when they work more than 40 hours in a week, unless they are “exempt” and fit into one of these categories:
- They are an executive
- They offer skilled professional services
- They have administrative or management responsibilities
- They are highly compensated (earning more than $107,432 per year in 2021)
- They are a computer programmer or analyst
- They have an outside sales role
There are a number of other small exceptions. Take a closer look at the classification of exempt and non-exempt employees or reach out to an employment or tax pro if you have more questions.
Getting from gross wages to a paycheck
Once you’ve figured out gross wages, it’s time to calculate your actual payroll by withholding federal, state, and local payroll taxes and applying any other deductions that might apply to an employee. This process basically works the same for all employees whether they are salaried or hourly. See more on how to calculate payroll taxes if you want to really get into the nitty gritty.
State-by-state payroll tax rates
One other thing you might need is your state’s payroll tax rate. Our paycheck calculator at the top of this page includes state-specific data, but if you want to get more details about the numbers that go into our tax calculations, choose your state below:
Other useful paycheck calculators
The calculator on this page is focused on normal pay runs for hourly employees and their salaried counterparts, but there are also a number of special situations when paychecks need a little more finagling. When an employee departs, for example, you may need to issue a final paycheck. Or if you offer tipped wages or bonuses, you may need to add another step or two to your gross pay formulas for hourly and salaried employees.