When you get your salary do you ever wonder the process that goes behind the computation of wages at a particular designation? If not then learning about it will surely help you in your next salary negotiation. Or if you are starting a business you need to learn about this process so that you may accurately be able to decide the salaries of your future employees. Understanding the process is far more complicated than learning things like esi full form or some other such trivia. Hence we have made a detailed guide for you to understand the process:
- First, the gross and the net income is calculated
Gross income is the total amount of money you earn from your job. Your employer will deduct taxes and other required payments from this amount to arrive at net income.
Net income is the amount of money that comes into your bank account after taxes, Social Security and other deductions have been made.
To calculate gross and net income, you first need to determine your gross pay. This is the total amount of money you earn before any deductions are taken out. If you’re paid a salary, then gross pay is easy to calculate: multiply your hourly rate by the number of hours worked during a week or month, depending on your pay period.
If instead you’re paid an hourly wage plus commission (as many salespeople are), then use the same formula as above but add in any commissions earned for that period.
- Payroll Calculations
The payroll calculation is based on a variety of factors, including the number of pay periods per year and days worked in a pay period; whether the employer uses a biweekly or monthly system; whether there are any overtime hours worked; as well as how much money is earned by each employee during the pay period along with accounting for various allowances like dearness allowance or cca allowance. Visit this page for more info. This information is entered into a payroll calculator that calculates the gross pay amount based on all these factors. The payroll calculator then deducts income tax withholding (based on federal tax rates) and Social Security/Medicare tax (based on federal rates) from each pay check. It also calculates any applicable state income taxes depending on where you live.
Take into account previous salary
- Calculate their previous salary
This is important for two reasons: First, it will help you determine whether or not your employee should be getting a raise; second, it will provide you with the information needed to negotiate their new salary. If they were making $50,000 per year and are currently asking for $60,000, they’re asking for a 20% raise — an increase that may seem reasonable if they have good performance reviews and other benefits are met but could be considered unreasonable if they haven’t been working there long enough to warrant such a big jump in pay.
Determine what percentage you can afford to pay them based on your budget (and whether or not other perks come along with the job). It’s best not to offer more than 10% in raises unless you have a good reason for doing so (such as when someone has been promoted or is taking on additional responsibilities).
When you’re hiring someone, several factors will affect how much you pay them. These include their experience level and the responsibilities associated with the position. Additionally, if the applicant has an offer from another company, they may be looking for more than what you were originally planning to offer them. By calculating your employee’s wages based on their previous salary, skill set and market value, you can avoid paying too much or too little for their services.
