Hourly employee pay rates and custom earning types

When you add default hours, this amount will automatically appear for your hourly employee every time you run payroll. This is useful if you have hourly employees that typically work the same amount of hours on each payroll.

Note: The default hours you add will be workweek.

1. Sign in to Gusto.
2. Click the People section. 
3. Click your employee’s name.
4. Go to the Pay tab.
5. Scroll to the "Compensation" section and click edit.
   • If you do not see this section, you may not have the required admin permissions. Reach out to the primary admin on the account to update your permissions.
6. Enter your employee's default hours to be reported per workweek.
   
   • If "Default Hours" are left blank for hourly employees, 0 hours will be defaulted into payroll.
7. Click Save.

The next time you run payroll, your employee's default hours will be entered automatically. You can change this amount in your payroll if your employee worked more or less than the default number of hours set.

Once you've set up an hourly employee with their first primary pay rate, admins with the required permissions can add as many additional pay rates as they'd like. 

Note: If you change an hourly employee to a salaried employee, it'll remove all additional pay rates from your employee.

Add an additional job

1. Sign in to Gusto.
2. Click the People section.
3. Click your employee’s name.
4. Go to the Pay tab.
5. In the Additional jobs section, click + Add.
   • Adding a job is only available to hourly employees.
6. Choose the new job title from the dropdown, or click create job title.
7. Select the wage frequency, and enter the wage amount.
8. Enter default hours, if applicable.
   • This is required if you're using AutoPilot.
9. Click Save.

Add a new earning type 

1. Sign in to Gusto.
2. Click the People section.
3. Click your employee’s name.
4. Go to the Pay tab.
5. In the "Additional earnings" section, click + Add.
6. Select the new earning from the Earning Type dropdown.
7. Enter the default amount, which will be automatically included every pay period.
8. Click Save.

Administrators with the required permissions can remove one of the rates from an hourly employee if they have multiple pay rates set up. If you do not see the option to remove a pay rate, work with the primary admin of your company's Gusto account. 

Remove a pay rate

1. Sign in to Gusto.
2. Click the People section.
3. Click your employee’s name.
4. Go to the Pay tab.
5. Find “Additional earnings” and click Edit next to the additional earning you'd like to remove.
6. Click Remove at the bottom of the screen.
7. Click Yes, remove to confirm. 

The first pay rate is unable to be deleted and can only be edited. To remove the first pay rate, along with every additional pay rate for an employee, change the "Employee Type" to Salary/No Overtime.

Rather than limit yourself to standard earning types—like bonus, tips, and commission—you can create a custom earning type and name it whatever you like.

Learn how to add a custom earning here.

If your employee regularly receives additional compensation, like tips or commission, you can add it to their profile so you do not have to enter it each time you run payroll.

To add a recurring payment to an employee’s payroll:

1. Sign in to Gusto.
2. Go to People.
3. Click the employee’s name.
4. Under Information, click Pay.
5. Scroll down to Additional earnings, and click Add.
6. Select the earning type from the dropdown.
7. Enter the additional amount they earn per pay period.
8. Click Save.

We’ll add this amount to all future regular payrolls.

Before you make changes

• A compensation change cannot be backdated if payroll has already been run for that pay period.
• If you make a compensation change that's effective today or earlier (backdated), employees will see it in Gusto right away — even if you have not run related payrolls yet. 

Edit a single employee's compensation

1. Sign in to Gusto.
2. Click the People section.
3. Click on your employee's name.
4. Go to the Pay tab.
5. Under the "Compensation" section, click edit.
6. Enter their new salary or hourly rate. Pay attention that the wage amount is for the wage frequency you select, as this is how their pay will be calculated.
7. Enter the default hours per workweek.
   • For salaried employees, this is useful if they do not work a standard 40-hour workweek, as you will not need to update their hours on every payroll.
   • For hourly employees, this is useful if your employee works the same number of hours every week
8. Select when their new compensation will be effective:
   • Specific Pay Period
     
     • Choose from any future payrolls you have not yet processed. The first day of the pay period is the day the change will take effect.
     • You cannot select a date in the middle of current pay period.
   • Specific Date—choose a date from the calendar.
     
     • Heads up: Compensation changes that take effect in the middle of a pay period will require manual calculation. You'll need to calculate the mid-period increased amount and add it manually to the employee's pay when processing the impacted payroll.
     • On future payrolls, the new compensation amount will apply to the full pay period.
9. (Optional) Enter a reason for the update, like "Promotion".
10. Click Save.

Bulk edit multiple employees' compensation

1. Sign in to Gusto.
2. Click the People section.
3. Click the checkboxes next to the employees whose compensation you’d like to update. 
4. Click Actions and select Update compensation.
5. For each employee:
   • Enter their salary adjustment in one of the following ways:
     • Enter the difference in gross wage in dollar amount or percentage.
     • Enter their new salary or hourly rate.
   • Select when their new compensation will be effective.
   • Select a specific pay period from the dropdown menu.
     • You can select from any future payrolls that have not been processed, but cannot select a date in the middle of the current pay period.
     • The first day of the pay period is the day the change will take effect.
   • (Optional) Enter a reason for the update, like "Promotion".
6. Once all changes have been made, click Save & continue.
7. Review the summary to make sure the changes look good and click Submit updates to finalize the changes.

Cancel a pending change

You can cancel a scheduled change until you run a payroll with the new compensation.

1. Sign in to Gusto.
2. Click the People section.
3. Click on the employee's name.
4. Go to the Pay tab.
5. Under the "Compensation" section, find the pending change and click Cancel.
6. Click Yes, cancel.
7. Follow the steps above to schedule a new change if needed.

Add a historical change 

1. Sign in to Gusto.
2. Click the People section.
3. Click on the employee's name.
4. Go to the Pay tab.
5. Under the "Compensation" section, click View compensation history.
6. Click Add.
7. Enter the required information. 
8. Click Save.

You can view compensation changes for each employee in their Gusto profiles—for now, there is no out-of-the-box report that can be run for all employees.

To view compensation changes in an employee's profile:

1. Go to the People section. 
2. Click the employee's name.
3. Go to the Pay section.
4. Under the "Compensation" section, click View compensation history. 

Increase pay

1. Multiply their old hourly rate by the number of days in the pay period they worked at this rate.
2. Multiply their new hourly rate by the number of days in the pay period they worked at this rate.
3. Add together both rates to get their correct salary.
4. When you process payroll, add in the difference between their old salary and their correct salary to account for the raise.

1. First, multiply $15 by the 32 hours she worked at that rate to get $480.
2. Second, multiply $20 by the 24 hours she worked at that rate to get $480.
3. Add the two rates together to get her total salary of $960.
4. When you process payroll, you'll see that her old payment is $840—calculate the difference between her old and new total salary, which is $120.
5. Enter $120 as the "Other Earnings" category in the payroll flow.

Decrease pay

If you need to decrease an employee's pay in the middle of a pay period, you'll need to manually calculate the amount to remove from the payroll to accommodate the decrease. 

1. Multiply their old hourly rate by the number of days in the pay period they worked at this rate.
2. Multiply their new hourly rate by the number of days in the pay period they worked at this rate.
3. Add together both rates to get their correct salary.
4. When you process payroll, subtract the difference between their old pay and their correct pay to account for the decrease.

When it comes to payroll, two important terms to understand are gross pay and net pay.

Gross pay is the amount of money your employees receive before any taxes and deductions are taken out. For example, when you tell an employee, “I’ll pay you $50,000 a year,” it means you'll pay them $50,000 in gross wages.

Net pay is the amount of money your employees take home after all taxes and deductions have been taken out. This is the money they have in their pocket on payday.