How to Calculate Payroll for Employee

 

We live in times of flexibility and constant change, hence, the question of how to calculate payroll may not be easy to answer. It’s a drudging work requiring lots of data and attention to details. Calculating payroll for an employee may not be an easy thing but with the right approach and tools, you can enhance this process.

It’s important to note that knowing how to calculate payroll is a crucial factor influencing the budget of your organization. Being able to accurately calculate payroll can save a lot of money. It can also help in determining possible mistakes and any further problems. After all, the budget is one of the most important assets of every business.

You can read many manuals on how to calculate payroll manually. However, it’s a tedious work and it’s better to avoid it as it’s easy for a mistake. And even the slightest inaccuracy in numbers can cause lots of trouble and stress. Nevertheless, there is a couple of elements that are common for both, manual and automatic payroll calculations:

  • you should inform your employees about your intention of calculating or recalculating payroll so they can collect all the necessary information;
  • since all the data is usually stored in the form of timesheets, they should all be reviewed, approved, and collected by the person responsible for this task;
  • the information about work hours has to include rounding hours worked (which may vary depending on which country your business is based in), overtime, travel time, training time, meal breaks, etc.
  • remember to include taxes.

 

how-to-calculate-payroll

 

Manual Payroll Calculation

 

The manual way of calculating payroll for an employee is time-consuming and monotonous. Here’s how you can do it in the easiest way in 5 steps:

  1. Usually, there is a specific person designated to do all the calculations. It can be an accountant or any employee who is good with numbers. And so, it is necessary for such a person to know all the labor laws. Make sure that such a person knows all the regulations.
  2. You can calculate weekly, monthly or annual payroll.
  3. Let’s say an employee’s timesheet shows he works 8 hours a week, Monday to Friday, 9 to 5 for $10 per hour ⇒ 40 hours x $10 = $400, weekly gross regular pay.
  4. To get the net pay you have to subtract deductions from the employees’ gross pay.
  5. Review the process to make sure you haven’t done any errors!

This method seems to be easy. But when you have to calculate payroll of more than 5 employees, things might get complicated. Especially if you pay various taxes and have to remember to include them in the calculations.

 

How to Calculate Payroll Automatically

 

Calculating payroll may be particularly tricky if you pay different rates to different employees, bill every customer on individual terms or hire many employees. Using time tracking software can entirely eliminate manual payroll calculation and completely automate this process.

Since reports on hours worked are the basis to payroll management, there is no better solution than to use special tools. One of the best examples is TimeCamp, time tracking software with various features.

TimeCamp’s desktop app automatically tracks all activities of your employees to later present all the data in the form of detailed reports. It’s not only a time tracking software. You can do much more with it and easily calculate payroll with these features:

  • You can use TimeCamp as a timesheet management system; extensive timesheets that you can easily access in the software neatly organize all the data on tracked hours. Later on, you can use the information to determine hourly, special and all rates necessary, calculate payroll, and deduct unpaid time.
  • It’s important to deduct the non-billable hours from the payroll. You can easily do it with TimeCamp’s feature of marking hours as billable or non-billable.
  • To make sure the data is always accurate, appoint one person responsible for timesheet approvals. TimeCamp allows you to lock employees out of this option to avoid mistakes.
  • Tracking hours worked allows you to have an insight into how your employees actually work and what activities they perform.

Implementing time tracking software eliminates tedious work and replaces accounting, timesheet, and payroll management software.

 

 

Watch the video to see how TimeCamp works!

 

Calculate Payroll Using Excell Calculator

 

Excel is a traditional form of calculating various numbers. Some people prefer to use it to make all the calculations. If you’re not a fan of the manual and automatic method, you can make all calculations in a spreadsheet. The best part about Excel is that it makes all calculations for you.

If you create an Excel template, you can use it as many times as you wish. But you have to know all the numbers (taxes, deductions, costs, etc.).

Brendan Butler from career addict fantastically explains how to do it. And so, the first step is to open a new Excel spreadsheet and create column names with such information like pay rate, total hours, gross pay, net pay, taxes, and deduction. Then, create simple formulas (you can find them all in his short guide), and save your template.

Check employee payroll register template by vertex42 or Microsoft Office’s standard payroll calculator template.

 

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Kate Kurzawska

Author Kate Kurzawska

Marketing Assistant at TimeCamp. Freelance translator, proofreader, copywriter & content writer, software researcher.

More posts by Kate Kurzawska

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