Article: Before you can begin to calculate payroll, you must know what the employee's gross income is. This is determined by multiplying the number of hours worked in a pay period by the hourly rate. For example, if an employee works 40 hours in a pay period and earns $15 an hour, you would multiply 40 times $15 to get a gross pay of $600.  Don't forget to factor in any overtime, commissions, or bonuses awarded during the pay period. Pay periods may be weekly, bi-weekly, or monthly. If the period is bi-weekly, for instance, then a full-time employee should work about 80 hours. An employee with a fixed salary will earn the same amount no matter how many hours they work. Federal Income Tax tables break down the amount of federal income tax an individual owes based on pay, exemptions, and filing status. The Internal Revenue Service posts current tax tables online. You may find state income tax tables online by visiting your state comptroller’s office website. You'll use the tax tables that you've retrieved to apply the correct amount of federal and state income tax to withhold.  For federal taxes, you'll look up the withholding amount based on the employee's gross pay, filing status, and the number of exemptions claimed. Then, you'll deduct that amount from the gross pay. For states taxes, consult your state's department of revenue website for instructions about how much to withhold. Calculating the amount of Social Security tax to pay is easy as it is a fixed percentage of an employee’s gross pay. Employers must bear in mind that they too are responsible for paying social security taxes. The current tax rate for Social Security is 6.2% for the employee. Like the Social Security tax, Medicare taxes are also a fixed percentage of a person’s earnings. In addition, employers are also responsible for paying Medicare taxes. Employees are currently taxed at 1.45% for Medicare. Employees may have voluntary contributions or mandatory deductions that need to be reduced from their gross pay.  Examples of voluntary contributions include 401(k) contributions, deferred compensation programs, long-term disability, and flexible spending accounts. Examples of mandatory deductions include child support and alimony. The amount remaining after these deductions are subtracted will be net pay. Go back over your calculations and make sure that you haven't make any mistakes.

What is a summary?
Determine the employee's gross pay. Obtain federal and state income tax tables. Apply federal and state income taxes. Apply Social Security tax rates. Deduct Medicare taxes. Subtract other deductions. Finalize net pay.