The Mathematics of Money

Copyright © 2008, The McGraw-Hill Companies, Inc.

15.1 Payroll 583

In some situations, a state law, union contract, or company policy may require overtime to be

paid when the standard over 40 hours threshold would not require it. For example, a company

may offer the overtime rate if an employee works on a holiday, or at an unattractive time

(such as a middle-of-the-night “third shift”). Or, the company might offer a different holiday

differential or shift differential.

Example 15.1.4 Giragossian Mechanical Corp pays its hourly employees double

time for working on holidays and a 35% shift differential for third shift. Gennaro

worked 30 hours last week, of which 6 were on Christmas Day and 12 were third shift.

His hourly rate is $9.20. Calculate his gross pay for the week.

It is easiest in this case to calculate his wages on the basis of straight time and then add on

the extra wages for the differentials. Since the holiday rate is double time, he gets and extra

$9.20 per hour for holiday work. The third-shift differential gives him an extra (35%)($9.20) 


$3.22 per hour for third shift.

Wages at straight time rate: (30 hours)($9.20/hour) 
 $276.00

Holiday differential pay: (6 hours)($9.20/hour) 
 $55.20

Shift differential pay: (12 hours)($3.22/hour) 
 $38.64

Total gross pay: $276.00  $55.20  $38.64 
 $369.84

Gross Pay Based on Piece Rate

Some workers are paid based on the amount they produce rather than on the time spent

producing it. Piece rates are not common in the United States today, but they are still in

use in some industries.

A piece rate may be a flat amount per item produced or may be based on a differential

pay scale that pays different amounts, depending on the number of items produced. The

first few may be paid at a certain rate, with additional items paid at a higher (or lower) rate

per item.

Example 15.1.5 Fraiser’s Tasty Land Acres Farms pays strawberry pickers on the

basis of the number of quarts of strawberries they pick. The pay scale, based on daily

production is:

Quarts Rate per Quart

0–25 $0.65

26–75 $0.70

Over 75 $0.75

Mickey picked 82 quarts of strawberries today. What is her gross pay for the day?

Her fi rst 25 quarts will be paid at the $0.65 rate, the next 50 at the $0.70 rate, and the last 7

at the highest $0.75 rate. So her total daily gross pay is:

25($0.65)  (50)($0.70)  7($0.75) 
 $16.25  $35.00  $5.25 
 $56.50

The pay scale given in this example could easily be misunderstood. Someone could easily

assume from reading it that, since Mickey picked 82 quarts, she would be paid 75 cents per

quart for all 82 quarts. Even though the way it was stated in the example is not unusual, it

would be clearer to rephrase it as:

Quarts Rate per Quart

First 25 $0.65

Next 50 $0.70

Additional quarts $0.75