How do you calculate basic pay from an hourly rate?

Multiply the number of hours worked by the basic hourly rate . The same calculation works for any period, so it gives a weekly figure from a week's hours and a monthly figure from a month's hours.

Define overtime pay .

Overtime pay is pay for hours worked in addition to the hours a person is contracted for. It is normally paid at a higher rate than the basic hourly rate.

True or False? Someone contracted for 35 hours who works 40 hours is paid the overtime rate for all 40 hours.

False. Only the extra hours attract the overtime rate, so here 35 hours are paid at the basic rate and 5 hours at the overtime rate. Subtracting the contracted hours from the hours actually worked is always the first move.

True or False? Four hours of overtime paid at double time is worth the same as eight hours at the basic rate.

True. Double time makes each overtime hour worth two basic hours, so four of them are worth eight. Reading a rate this way is a quick sense check: at time and a half, four overtime hours would instead be worth six basic hours.

Commission is income paid as a percentage of the sales a person has made. The percentage is called the rate of commission, and it is applied to a stated amount of sales rather than to the person's hours.

How does commission usually fit into what a salesperson earns?

It is normally paid in addition to a basic pay, rather than instead of it. So a salesperson with a poor month still receives their basic pay, and the commission is an extra on top of it.

A bonus is an extra payment an employer makes on top of a person's normal pay. It is usually a fixed amount, so it is added on rather than worked out as a percentage.

What does it mean if a salesperson has different levels of commission?

Different rates apply to different bands of sales, rather than one rate applying throughout. An employer might pay 10% on sales between £20,000 and £40,000 and 20% on sales above £40,000, so each band earns at its own rate.

Gross pay is the total amount a person earns before any deductions are taken off. It is the figure an employer works out first, and the amount the person actually receives is worked out from it.

What can gross pay be made up of?

Gross pay can include any of the following: basic pay or salary overtime bonuses commission benefits and allowances A question will not always include all five, so work from what it actually gives you.

How do you find gross pay when someone has several different sources of income?

Work out the value of each component on its own, then add them all together. The order makes no difference, and the commonest slip is to calculate one component carefully and then forget to add the rest of them on.

True or False? Gross pay is the amount that actually reaches a person's bank account.

False. That describes net pay , which is what is left once the deductions have been taken off. Gross pay is the larger figure that the deductions are taken from in the first place.

Why does gross pay matter, if it is not the amount someone receives?

Because the deductions taken from someone's pay are all worked out from the gross figure, before anything has been taken off. Using the smaller take-home figure as the starting point would give the wrong answer every time.

How do you work out a National Insurance payment when earnings span more than one threshold?

Find how much of the earnings falls inside each band, multiply each of those amounts by that band's own rate, and add the results together. The whole salary is never multiplied by a single rate, because each band is charged separately.

True or False? The National Insurance rate on earnings above the upper threshold is higher than the rate below it.

False. The rate falls rather than rises: 8% applies between the two thresholds, but only 2% applies above the upper one. This catches people out because tax rates usually rise with income, so it is worth reading the table rather than assuming.

What is the shortcut when the lowest National Insurance band has a rate of 0%?

That band can be skipped entirely, because 0% of any amount is nothing. It saves a line of working, and it means the first figure you actually calculate is the one in the next band up.

True or False? National Insurance is worked out on a person's pay before pension contributions are taken off.

True. The National Insurance calculation uses the wage before deductions, so paying into a pension does not reduce it. Deductions are not taken off one after another: each is worked out from the same starting figure.

How does a private pension contribution differ from the State Pension?

A private pension contribution is a percentage of gross pay that the employee chooses to pay in, and it is a deduction from their wage. The State Pension is funded from National Insurance instead, so a person can end up with both.

Net pay is the amount a person earns once all deductions have been taken off. It is the money that actually reaches them on payday, which is why it is often called take-home pay.

What is the general method for finding someone's net pay?

Work out the gross pay, work out the total of all the deductions, then subtract the second from the first. Both totals have to be complete before the subtraction, which is why exam questions usually build up to it in parts.

Which deductions are taken off gross pay to give net pay?

There are three to look for: National Insurance Income Tax pension contributions Not every question includes all three, so subtract only the ones you are actually given.

True or False? On a payslip, the total of the Earnings column is the net pay.

False. The Earnings column adds up to the gross pay, and the net pay is what is left after Total Deductions has been subtracted from it. A payslip is laid out in two halves for this reason: earnings on one side, deductions on the other.

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Pay & Salary (SQA National 5 Applications of Mathematics): Flashcards

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How do you calculate basic pay from an hourly rate?

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Cards in this collection (32)

How do you calculate basic pay from an hourly rate?
Multiply the number of hours worked by the basic hourly rate.
The same calculation works for any period, so it gives a weekly figure from a week's hours and a monthly figure from a month's hours.
Define overtime pay.
Overtime pay is pay for hours worked in addition to the hours a person is contracted for.
It is normally paid at a higher rate than the basic hourly rate.
Complete the two common overtime rates:
Time and a half means multiplying the basic rate by $______$ , and double time means multiplying it by $______$ instead.
The completed sentence is:
Time and a half means multiplying the basic rate by 1.5, and double time means multiplying it by 2 instead.
The multiplier is applied to the hourly rate, not to the number of hours.
True or False?
Someone contracted for 35 hours who works 40 hours is paid the overtime rate for all 40 hours.
False.
Only the extra hours attract the overtime rate, so here 35 hours are paid at the basic rate and 5 hours at the overtime rate.
Subtracting the contracted hours from the hours actually worked is always the first move.
Scott is contracted for 32 hours at £12.30 an hour with double time for overtime, and he works 36.5 hours. What is his overtime pay?
His overtime pay is £110.70.
He worked $36.5 - 32 = 4.5$ hours of overtime, at a double-time rate of £24.60 an hour.
Multiplying gives $4.5 \times \pounds 24.60 = \pounds 110.70$ .
True or False?
Four hours of overtime paid at double time is worth the same as eight hours at the basic rate.
True.
Double time makes each overtime hour worth two basic hours, so four of them are worth eight.
Reading a rate this way is a quick sense check: at time and a half, four overtime hours would instead be worth six basic hours.
Define commission.
Commission is income paid as a percentage of the sales a person has made.
The percentage is called the rate of commission, and it is applied to a stated amount of sales rather than to the person's hours.
How does commission usually fit into what a salesperson earns?
It is normally paid in addition to a basic pay, rather than instead of it.
So a salesperson with a poor month still receives their basic pay, and the commission is an extra on top of it.
True or False?
A salesperson paid 6% commission on sales over £45,000 who sells £80,000 earns £4,800 in commission.
False.
The word over means only the sales above £45,000 count, which is £35,000, so the commission is $0.06 \times \pounds 35, 000 = \pounds 2, 100$ .
£4,800 is 6% of the whole £80,000, which is the mistake this wording is designed to catch.
Define bonus.
A bonus is an extra payment an employer makes on top of a person's normal pay.
It is usually a fixed amount, so it is added on rather than worked out as a percentage.
A salesperson is paid 4% commission on all of her sales, and she sells £9,000 in a month. What is her commission?
Her commission is £360.
Commission is charged on all the sales here, so the whole £9,000 is used: $0.04 \times \pounds 9, 000 = \pounds 360$ .
Always check the wording, because commission is sometimes paid on all sales and sometimes only on sales above a figure.
What does it mean if a salesperson has different levels of commission?
Different rates apply to different bands of sales, rather than one rate applying throughout.
An employer might pay 10% on sales between £20,000 and £40,000 and 20% on sales above £40,000, so each band earns at its own rate.
Define gross pay.
Gross pay is the total amount a person earns before any deductions are taken off.
It is the figure an employer works out first, and the amount the person actually receives is worked out from it.
What can gross pay be made up of?
Gross pay can include any of the following:
- basic pay or salary
- overtime
- bonuses
- commission
- benefits and allowances
A question will not always include all five, so work from what it actually gives you.
How do you find gross pay when someone has several different sources of income?
Work out the value of each component on its own, then add them all together.
The order makes no difference, and the commonest slip is to calculate one component carefully and then forget to add the rest of them on.
Rula's basic pay is £397.60, her overtime pay is £149.10 and she receives a £50 bonus. What is her gross pay?
Her gross pay is £596.70.
Each component is simply added on:
$\pounds 397.60 + \pounds 149.10 + \pounds 50 = \pounds 596.70$
True or False?
Gross pay is the amount that actually reaches a person's bank account.
False.
That describes net pay, which is what is left once the deductions have been taken off.
Gross pay is the larger figure that the deductions are taken from in the first place.
Why does gross pay matter, if it is not the amount someone receives?
Because the deductions taken from someone's pay are all worked out from the gross figure, before anything has been taken off.
Using the smaller take-home figure as the starting point would give the wrong answer every time.
How do you work out a National Insurance payment when earnings span more than one threshold?
Find how much of the earnings falls inside each band, multiply each of those amounts by that band's own rate, and add the results together.
The whole salary is never multiplied by a single rate, because each band is charged separately.
Annual National Insurance is 0% up to £12,570, 8% up to £50,270 and 2% above that. Complete the bands for earnings of £55,000:
$50270 - 12570 =______at 8 %, and 55000 - 50270 =______at 2 %$
The completed bands are:
$50270 - 12570 = 37700 at 8 %, and 55000 - 50270 = 4730 at 2 %$
Each band is the gap between two thresholds, except the top one, which runs from the last threshold up to the actual earnings.
George earns £1150 a week, with National Insurance at 0% up to £242, 8% from £242 to £967 and 2% above £967. What is his weekly payment?
His weekly payment is £61.66.
The 8% band holds $\pounds 967 - \pounds 242 = \pounds 725$ , giving £58, and the 2% band holds $\pounds 1150 - \pounds 967 = \pounds 183$ , giving £3.66.
Adding the two contributions gives $\pounds 58 + \pounds 3.66 = \pounds 61.66$ .
True or False?
The National Insurance rate on earnings above the upper threshold is higher than the rate below it.
False.
The rate falls rather than rises: 8% applies between the two thresholds, but only 2% applies above the upper one.
This catches people out because tax rates usually rise with income, so it is worth reading the table rather than assuming.
What is the shortcut when the lowest National Insurance band has a rate of 0%?
That band can be skipped entirely, because 0% of any amount is nothing.
It saves a line of working, and it means the first figure you actually calculate is the one in the next band up.
True or False?
National Insurance is worked out on a person's pay before pension contributions are taken off.
True.
The National Insurance calculation uses the wage before deductions, so paying into a pension does not reduce it.
Deductions are not taken off one after another: each is worked out from the same starting figure.
Terry's annual salary is £44,200 and he pays 7.5% of it into his pension in 52 weekly payments. How much is each payment?
Each weekly payment is £63.75.
His yearly contribution is $0.075 \times \pounds 44, 200 = \pounds 3315$ .
Spreading that across the year gives $\pounds 3315 \div 52 = \pounds 63.75$ .
How does a private pension contribution differ from the State Pension?
A private pension contribution is a percentage of gross pay that the employee chooses to pay in, and it is a deduction from their wage.
The State Pension is funded from National Insurance instead, so a person can end up with both.
Define net pay.
Net pay is the amount a person earns once all deductions have been taken off.
It is the money that actually reaches them on payday, which is why it is often called take-home pay.
What is the general method for finding someone's net pay?
Work out the gross pay, work out the total of all the deductions, then subtract the second from the first.
Both totals have to be complete before the subtraction, which is why exam questions usually build up to it in parts.
Which deductions are taken off gross pay to give net pay?
There are three to look for:
- National Insurance
- Income Tax
- pension contributions
Not every question includes all three, so subtract only the ones you are actually given.
Gwen's annual salary is £25,500, and her deductions are £1034.40 National Insurance, £2040 pension and £2574 Income Tax. What is her annual net pay?
Her annual net pay is £19,851.60.
All three deductions come off the same starting figure:
$\pounds 25, 500 - \pounds 1034.40 - \pounds 2040 - \pounds 2574 = \pounds 19, 851.60$
True or False?
On a payslip, the total of the Earnings column is the net pay.
False.
The Earnings column adds up to the gross pay, and the net pay is what is left after Total Deductions has been subtracted from it.
A payslip is laid out in two halves for this reason: earnings on one side, deductions on the other.
A payslip shows basic pay £2500, overtime £120, and total deductions £473.10. Complete the two totals:
$gross pay = \pounds______and net pay = \pounds______$
The completed totals are:
$gross pay = \pounds 2620.00 and net pay = \pounds 2146.90$
The earnings are added to reach the gross figure, and the deductions are then taken off it in one subtraction.

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