Admins with the required permissions can edit an employee's hours and compensation. If you're unable to complete an action, reach out to the primary admin of your account.
If you need to pay a one-time additional earnings paycheck, process an off-cycle payroll or bonus payroll instead.
Learn about the different employee classification options and how to change them.
Your employees can be classified in different ways based on their salary and the type of work that they do. These classifications operate under the Department of Labor FLSA’s rule in Gusto.
Once you determine your employee's correct classification, make sure their status is entered correctly in your account. If their status changes, you can update it in their employee profile.
Keep in mind: Most employees are not exempt from overtime, and misclassifying your employees can result in decreased employee morale and having to pay historical wages.
If you're not sure how your employees should be classified, the Department of Labor has published some helpful guidelines.
Generally, there are three classifications:
Earns wages based on the number of hours the employee works and earns overtime pay when applicable. This is the most common classification, as most employees in the U.S. are required to be paid at least the federal minimum wage for all hours worked plus overtime pay at one and one-half times the regular rate of pay for all hours worked over 40 hours in a workweek.
Note: Minimum wage requirements can vary by state.
Earns a fixed salary if they work 40 hours or less per week. Earns overtime if they work more than 40 hours per week (regulations vary per state).
Earns a fixed salary regardless of how many hours the employee works. Some employees may be exempt from overtime pay if they're employed as an executive, administrative, professional, or outside sales, as well as certain computer employees. However, job titles alone do not determine exempt status.
To be exempt from overtime, employees-specific job duties must meet a certain set of requirements, and they generally should be paid a salary of at least:
Note: Salaried exempt employees are not eligible for overtime pay.
Earns wages based only on commission. Commission-only employees need to make at least minimum wage for hours worked.
Earns wages in whole or in part on a commission basis and works in certain industries.
To be exempt from overtime under the FLSA’s commission rule, employees must meet a certain set of requirements:
S-Corp owners
Review this article to set up an employee as an S-Corporation owner.
If your employee's classification is changing, update this in Gusto using the instructions below.
If the employee is meant to be a contractor, convert them to an independent contractor rather than updating their employee-classification.
Important: If you're using multiple pay schedules, there may be a gap or overlap in the employee's hours for this payroll.
When you update default hours, this amount will automatically appear for your salaried employee every time you run payroll. Updating default hours will not change the employee’s gross pay per pay period—this is useful if your employee does not work a standard 40-hour workweek.
Note: The default hours you add will be per workweek.
The next time you run payroll, your employee's default hours will be entered automatically.
Important: You can change this amount while running payroll if your employee worked more or less than the default number of hours set, however adjusting a salaried employee's hours while running payroll will also adjust the employee's wages.
Admins with the required permissions can edit the hours for salaried employees in payroll.
Adjusting a salaried employee's hours while running payroll will also adjust the employee's wages.
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.
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:
We’ll add this amount to all future regular payrolls.
You can cancel a scheduled change until you run a payroll with the new compensation.
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:
If your employee receives an increase or decrease in pay in the middle of a pay period, you must manually calculate the amount to add/deduct to/from the employee's earnings in payroll to accommodate the salary change. Once you have the new amount, you can zero out their hours in the next payroll, and add the new amount as a correction payment.
Consult a CPA with any questions about the method outlined below (for both increases and decreases), as several methods may be acceptable depending on your specific situation.
In the example calculation below, Aly is making $50,000 a year when she gets a raise to $55,000 a year. She's paid every other week on Friday. Her raise is effective in the middle of the pay period, on a non-payday Friday.
| Divide their annual salary by the number of pay periods in a year.
| Aly makes $50,000 a year and is paid every other week. | $50,000/26 = $1,923.08 |
| Divide the amount they're paid in a period by the number of days in a period to calculate their old daily rate. | Aly makes $1923.08 for 14 days worked. | $1923.08/14 = $137.36 |
| Repeat the steps above to find your employee's new daily rate. | Aly now makes $55,000 a year. Her new daily rate is $151.10. | $55,000/26 = $2,115.38. $2115.38/14 = $151.10 |
| Add the number of days at the old rate with the number of days at the new rate to get the total salary for the pay period. | Aly worked 7 days at $137.36 a day. She worked 7 days at $151.10 a day. Her total salary for the pay period is $2,019.22. | $137.36 x 7 = $961.52 $151.10 x 7 = $1,057.70 $961.52 + $1,057.70 = $2,019.22 |
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.