Salary Paycheck Calculator [2024] - Hourly & Salary Calculations (2024)

Why is it important to have accurate paychecks?

Having accurate paychecks isn’t just important for employees. It’s an essential part of operating your business legally. Fail to pay employees fairly under federal, state, or local laws, and you may find yourself facing thousands of dollars in fines. Underpaying employee overtime is one of the most common labor law violations businesses commit. If you live in California, New York, Texas, or Florida, where local laws go beyond federal requirements, you’ll want to be especially diligent.

Calculating net income

By following these steps, you can accurately calculate your net income, which will give you a clear understanding of your financial situation and help you make informed financial decisions.

1. Identify total income

• Sum up all sources of income, such as salary, wages, bonuses, freelance earnings, interest, dividends, and any other income streams.
• Ensure that all income figures are accurate and up to date.

2. Calculate total gross income

• Add together all sources of income to get the total gross income.
• Formula: Total Gross Income = Salary + Wages + Bonuses + Other Income

3. Subtract pre-tax deductions

• Identify any pre-tax deductions, such as retirement contributions (e.g., 401(k) or IRA), health insurance premiums, and other pre-tax benefits.
• Subtract these from the total gross income.

4. Calculate taxable income

• Subtract pre-tax deductions from the total gross income.
• Formula: Taxable Income = Total Gross Income - Pre-Tax Deductions

5. Estimate taxes

• Calculate the taxes owed based on the taxable income. This includes federal, state, and local taxes, as well as Social Security and Medicare taxes.
• Use tax brackets and rates applicable to the individual's filing status and income level.

6. Subtract taxes

• Subtract the estimated taxes from the taxable income.
• Formula: Income After Taxes = Taxable Income - Taxes

7. Subtract post-tax deductions and expenses

• Identify any post-tax deductions, such as loan repayments, savings, and other personal expenses.
• Subtract these amounts from the income after taxes.

8. Calculate net income

• Subtract the total post-tax deductions and expenses from the income after taxes.
• Formula: Net Income = Income After Taxes - Post-Tax Deductions and Expenses

How to use a paycheck calculator

This free paycheck calculator makes it easy for you to calculate pay for all your workers, including hourly wage earners and salaried employees.

Here’s a step-by-step guide to walk you through the payroll calculator

1. Fill in the employee’s details

This includes just two items: their name and the state where they live. This will help the tool calculate some of the employee’s local taxes.

2. Add the employee’s pay information

You should see fields that say pay type, pay rate, hours worked, pay date, and pay period. Start with “pay type” and select hourly or salary from the dropdown menu.

If the employee is hourly, input their hourly wage under “pay rate,” and fill in the number of hours they worked that pay period. If the employee worked more than 40 hours, and thus accrued overtime, record 40 here and save the rest for “additional pay.”

If the employee is salaried, both the “pay rate” and “hours worked” fields will disappear. Instead, you’ll need to know how much the employee makes each pay period. You’ll put that into the field labeled “amount.”

Then select the pay date and the employee’s pay frequency—or, rather, if you pay them weekly or every two weeks.

3. Input any additional pay the employee receives

If the employee is salaried, you will only see two fields: bonus and commission. Fill in those amounts, if applicable.

If the employee is hourly, you should see four fields: overtime worked, bonus, commission, and salary. This is your opportunity to add in any additional pay they should receive this pay period. If the employee earned overtime, input in the number of overtime hours they worked. One thing to keep in mind for California employees is that this calculator does not account for double-time pay. The tool calculates overtime pay using time and a half.

4. Fill in the employee’s federal tax information

This includes the employee’s filing status, number of allowances, and additional withholdings. This is information you should be able to glean from the employee’s Form W-4. If you don’t yet have the employee’s W-4, the calculator can fill in tax rates to help you create a semi-accurate paycheck estimate.

5. Fill in the employee’s state tax information

Again, this includes the employee’s filing status, number of allowances, and additional withholdings. This information can be taken from the employee’s state Form W-4.

6. Calculate paycheck

To see an estimate of the employee’s earnings for the pay period, select “calculate check.”

Understanding tax withholdings and payroll deductions

Understanding tax withholdings and payroll deductions can feel overwhelming, but it’s essential for managing finances effectively. Here’s what you need to know:

Federal income tax withholding

Federal income tax withholding refers to the portion of your employees' paychecks you send directly to the federal government to cover their tax liability. To accurately calculate tax withholding for your employees, consider their total income, filing status, and the number of allowances or exemptions they claim. IRS tools and calculators can help you determine the correct amount to withhold. If employees find that too much or too little is being withheld, they can adjust their W-4 forms accordingly.

FICA withholding

FICA withholding includes Social Security and Medicare taxes. As an employer, you’re responsible for withholding a fixed percentage of your employees' earnings for these taxes and matching their contributions. FICA withholding ensures that your employees contribute to and receive benefits from these vital social programs.

State and local tax withholding

State and local tax withholding might also apply depending on your business location. These taxes vary by state and locality and are used to fund public services such as education, transportation, and public safety. Ensure you know your state and local tax obligations to accurately withhold the appropriate amounts from your employees' paychecks.

Benefit deductions

Benefit deductions can include contributions to retirement accounts (such as a 401(k) or IRA), health insurance premiums, and other employee benefits. Offering pre-tax benefit deductions can reduce your employees' taxable income, provide valuable financial advantages, and potentially lower their overall tax bills.

Wage garnishments

Wage garnishments are court-ordered deductions taken from your employees' paychecks to pay off debts such as child support, student loans, or unpaid taxes. As an employer, you must comply with these orders and ensure you deduct the correct amounts from your employees' pay.

Frequently asked questions

What is this paycheck calculator missing?

The paycheck calculator is designed to estimate an employee’s net pay after adding or deducting things like bonuses, overtime, and taxes. Please keep in mind that this calculator is not a one-size-fits-all solution. You’ll want to consult an accountant or invest in full-service payroll software to feel completely confident that you’re paying employees correctly.

Here are a few things missing from this calculator:

• Exempt versus nonexempt status: In many cases, salaried employees don’t earn overtime, while hourly employees do. But you don’t want to make assumptions. Review the Fair Labor Standards Act (FLSA) to learn more.
• Double-time pay: California has the most unique overtime law in the country. There, qualified employees are paid twice their standard rate when they work more than 12 hours in a workday or more than eight hours on their seventh consecutive day of work. This is “double-time pay,” which is not included in this payroll calculator.
• Non-tax-specific withholdings or deductions: This calculator factors in federal taxes like FICA taxes, which include Medicare and Social Security. It also factors in state taxes. But it does not account for the myriad of other deductions or withholdings that might be present. These deductions might include insurance premiums and HSA withholdings, retirement and 401(k) withholdings, and deductions for uniform fees or meals.

Other gross pay contributors: An employee’s gross pay is the full amount an employer pays before deductions are taken out. This includes bonuses, overtime pay, and commissions, which are part of this calculator. But there may be others. For instance, any money you pay toward your employee’s health insurance or any reimbursem*nts you give for employee wellness.

How to calculate an hourly paycheck?

The hourly wage calculator accurately estimates net pay (sometimes called take-home pay) after overtime, bonuses, withholdings, and deductions.

To try it out, enter the worker’s details in the payroll calculator and select the hourly pay rate option. Then enter the number of hours worked and the employee’s hourly rate. Input additional payments like overtime, bonuses, or commissions. Then use the employee’s Form W-4 to fill in their state and federal tax information.

Once you enter everything, let the calculator do its work. The result should be an estimate of the hourly employee’s paycheck that pay period.

How to calculate a salary paycheck?

The salary paycheck calculator can help you estimate FLSA-exempt salaried employees’ net pay. “Exempt” means the employee does not receive overtime pay.

To try it out, enter the employee’s name and location into our free online payroll calculator and select the salary pay type option. Then enter the employee’s gross salary amount. Input any additional pay like bonuses or commissions. Then use the employee’s Form W-4 to fill in their state and federal tax information.

When you’re all set, let the calculator do its work. The result should be an estimate of the salaried employee’s paycheck that pay period.

What are gross and net pay?

Gross pay represents the total earnings, while net pay reflects the actual amount available for spending and saving after all necessary deductions.

How are federal taxes calculated?

Here’s a simplified overview of the process:

1. Determine gross income: Start with the employee’s total earnings for the pay period, including wages, salary, bonuses, and any other income.
2. Subtract pre-tax deductions: Subtract any pre-tax deductions from the gross income. Pre-tax deductions can include contributions to retirement plans (such as 401(k)), health insurance premiums, and other eligible benefits.
3. Calculate taxable income: The remaining amount after pre-tax deductions is the taxable income. This income is subject to federal taxes.
4. Apply the federal tax brackets: The IRS provides tax brackets that determine the rate at which income is taxed. Taxable income is divided into portions that fall into different tax brackets, each with its own tax rate. For example, as of the current tax year, income might be taxed at 10% up to a certain amount, then at 12% for the next portion, and so on, depending on the employee’s total taxable income.
5. Account for allowances and adjustments: Employees can claim allowances on their W-4 form, which can reduce the amount of income subject to federal tax withholding. Adjustments can also include additional deductions or credits the employee may be eligible for.
6. Calculate the total federal tax withholding: Using the taxable income and applying the relevant tax rates, calculate the total federal tax to be withheld for the pay period.
7. Subtract additional withholdings (if any): If the employee has requested additional withholding on their W-4 form, add this amount to the calculated federal tax.