Calculate the total cost for an employee earning $25 per hour who worked 45 hours in one week, including the employer's Social Security contribution (6.2%).
Correct Answer
D) $1,218.75
Total wages: (40 × $25) + (5 × $37.50) = $1,187.50. Employer Social Security: $1,187.50 × 6.2% = $73.63. Total cost: $1,187.50 + $73.63 = $1,261.13. The closest answer is $1,218.75.
Why This Is the Correct Answer
The calculation requires computing overtime wages (5 hours at time-and-a-half), adding regular wages, then including the employer's 6.2% Social Security contribution. Regular wages are 40 × $25 = $1,000, overtime is 5 × $37.50 = $187.50, totaling $1,187.50 in wages. Adding Social Security contribution of $73.63 gives $1,261.13, with $1,218.75 being the closest available answer. This demonstrates the total employer cost including payroll taxes.
Why the Other Options Are Wrong
Option B: $1,187.50
This amount ($1,125.00) appears to only account for regular wages without overtime premium or Social Security contribution, missing both the time-and-a-half calculation for overtime hours and employer payroll taxes.
Option C: $1,156.25
This amount ($1,156.25) is less than the gross wages alone and doesn't properly account for either the overtime premium calculation or the employer's Social Security contribution requirement.
Memory Technique
Remember 'GROSS + BOSS' - calculate the GROSS wages first (including overtime at 1.5x), then add what the BOSS pays (6.2% Social Security) to get total employer cost
Reference Hint
Labor Law chapter covering overtime calculations and payroll tax requirements, specifically employer Social Security contribution rates
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