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Hourly Paycheck Calculator

Updated on April 22, 2024
Article byHarsh Katara
Reviewed byDheeraj Vaidya, CFA, FRM

What Is An Hourly Paycheck Calculator?

An Hourly Paycheck Calculator is the tool designed to helps calculate the hourly wages of workers or staff members. It is used to find the number of wages that will be received after deducting an adequate amount of taxes such as social security taxes, fed taxes, etc.

Hourly Paycheck Calculator

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An hourly paycheck calculator, as the name suggests, lets businesses calculate the amount to be mentioned in a paycheck of an individual. To ensure the calculation is correct, users must enter the right details for the online calculators to work efficiently and accurately.

Hourly Paycheck Calculator Explained

An hourly paycheck calculator is a significant online tool that allows employers to calculate how much a staff member or worker or employee earns in an hour. It is for anyone whom a company pays on an hourly basis. Users must enter accurate information in the texts that require them to fill in the details to be used for the calculation for accurate results. These texts might ask for applicable deductions, incentives or any other inclusions or exclusions in the payable amount.

At many places, as per work locations, the wages are paid on an hourly basis, and overtime hours, if any worked upon, will be paid on an hourly basis, but the hourly rate that shall be paid will be higher than the normal hourly rate. This calculator will determine the paycheck and in-hand receipt of the wages. Different deductions shall be made before encashment of the cheque, including social security tax, medicare, if any, Fed tax, state and local tax, etc.

There could be further deductions such as insurance that is employee-paid health insurance etc. All these deductions must be accounted for and adjusted along with the total amount due, and the remaining net amount shall be paid to the worker. There are different pay periods in different parts of the world, but here we shall focus on weekly pay. For the time being, we shall ignore filing status, that is, whether the return will be filed single or married or household head, etc., as the deductions will vary. Our focus will drift toward tax instead of hourly paycheck calculation.

Once the employers or companies decide on whether to use an online free hourly paycheck calculator or they should install an app on the computer to do so, the first thing is to set up the state they would want the calculator work for. This is an important step as each state has a separate guideline and regulation when it comes to calculating the hourly wage.

Formula

The formula based on which an hourly paycheck calculator works is:–

 Hourly Paycheck  = Y + ( RH * P ) + ( OH * A ) – T

Wherein,

  • Y is the Year to date income.
  • RH is the regular hours worked by the worker.
  • P is the wages paid per hour for regular hours.
  • OH is the overtime hours worked by the worker.
  • A is the wages paid per hour for overtime hours.
  • T is the taxes which shall include social security taxes, medicare, fed taxes, etc.

Hourly Paycheck Calculator

Y + ( RH * P ) + ( OH * A ) – T


Wherein,
  • Y is the Year till date income
  • RH is the Regular hours worked by the worker
  • P is the wages paid per hour for regular hours
  • OH is the overtime hours worked by the worker
  • A is the wages paid per hour for overtime hours
  • T is the taxes which shall include social security taxes, medicare, fed taxes etc.
the Year till date income
$
Regular hours worked by the worker
$
wages paid per hour for regular hours
$
overtime hours worked by the worker
$
wages paid per hour for overtime hours
$
taxes which shall include social security taxes, medicare, fed taxes etc.
$

How to Calculate?

Below are the steps that need to be followed –

Step #1 – One needs to start with the income that has already been received, or in other words, one needs to account for a year till date income, as deductions also apply to them.

Step #2 – Determine the normal working hours of the organization or for the worker who is concerned for a week.

Step #3 – Figure out the hourly rate that shall be paid for those normal working hours

Step #4 – Now multiply the number of hours determined in step 2 by the rate paid per hour to determine the total amount due by the employer for the given week in concern.

Step #5 – Similarly, determine the overtime hours worked by the employee during the given week.

Step #6 – Now, determine the overtime rate per hour, which should be more than the normal hourly rate.

Step #7 – Again, take the product of the total overtime hours worked by the overtime rate per hour, and that amount shall be the overtime wages to be received by the employee.

Step #8 – In this step, take a total of the year till date income determined in step 1, total normal wages determine in step 4, and total overtime wages determine in step 7.

Step #9 – Figure out the taxes and other deductions such as social security tax, fed tax, local tax, medicare or employee-paid insurance, etc.

Step #10 – Deduct the total amount arrived in step 9 from the total wages arrived in step 8, and the net result will be the total paycheck to be received by the employee for that period.

You can download this Hourly Paycheck Calculator Excel Template here – Hourly Paycheck Calculator Excel Template

Examples

Let us consider the following instances to understand how the free hourly paycheck calculator works:

Example 1

Mr. Y is a young youth living in the US and was born and brought up there only. He works in a company where the firm’s policy is to pay wages weekly. He has earned $5,780 till now. The company has the policy to pay $75 standard hourly and $100 per hour overtime wages. The normal working hours of the employee is 8 hours a day. Mr. Y, however, is eligible for 1-hour leave, but the same shall be unpaid. Mr. Y, due to personal reasons, had to take leave for 1 hour daily. To recover the unpaid wages, Mr. Y has worked overtime, and the total number of overtime he worked daily came to ½ hour.

The company shall deduct social security taxes of the total gross income at a rate of 10% and local and fed taxes at a rate of 5% of the gross income. The employee shall bear the insurance expenses, which are $350 for the year, and the same will be deducted all at once.

Considering all the above information and figures, you must compute the yearly income Mr. Y shall receive after considering necessary adjustments.

Solution

We are given the normal hourly rate and overtime wages rate per hour. However, we are not given the normal and overtime hours directly, so we would need to calculate that first.

Hourly Paycheck Calculator Example

We can now use the below formula to calculate the income from the hourly rate calculator.

Hourly Paycheck = Y + ( RH * P ) + ( OH * A ) – T

We shall now determine T per the below –

Hourly Paycheck Calculator Example 2
  • = $5,780 + (49 x $75 ) + ( 3.50 x $100 ) – T
  • = 9,805 – T

Taxes such as social security taxes will be 10% of the gross and fed taxes 5% of the gross and insurance we are given.

Hourly Paycheck Calculator Example 2.2

Therefore, net income will be 9,805 – 980.50 – 490.25 – $350, which shall be 7,984.25.

Example 2

Kelly, a full-time freelance writer from Texas, gets paid on hourly basis for the projects she handles. The client she works for uses online hourly paycheck calculator to determine the amount required to be paid for her work. The calculator has the following sections to be filled in by the employer:

  • State and date where the state from which the writer belongs and the date for which the payment would be applicable are entered.
  • The next section is to be filled in with the number of hours worked and the amount applicable for each hour.Next is the section that asks for earnings, including the gross pay, pay frequency, etc.
  • Last but not least, the employers must specify the federal taxes applicable. This requires them to enter W4 information.

As soon as the employer puts in the details, they obtain the amount to be mentioned in Kelly’s paycheck.

Importance

There are many factors that make an hourly paycheck calculator a convenient option to use for the hourly-based wage calculation. The following points reflect the importance of these calculators:

  • It makes payroll processing easier for every pay period.
  • Tax filings and payments are handled by it and users are free from doing it all by themselves.
  • These calculators take care of all deductions and help obtain the net pay for the hour-based payrolls.
  • It works as per the regulations and guidelines that particular state follows.

This has been a guide to what is Hourly Paycheck Calculator. Here, we explain the concept with its formula, how to calculate it, examples, and importance. You may also take a look at the following useful articles –