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 temporarily remove an employee from payroll, skip them on payroll rather than adjusting their pay. If you're looking to convert an employee to a contractor, follow the steps in this article.
With Gusto Time Tracking, you can track, review, and approve your team’s hours in Gusto and then run payroll as usual—it’s all automatic.
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. 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 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 based only on commission. 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 at least a salary basis of:
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 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 per pay period to align with the pay schedule your company has set up.
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.
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
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.
Example: You might use a custom earning type for a signing bonus.
These will be treated as supplemental wages that are separate from regular wages, but will be taxed as regular wages. Some custom earnings will impact overtime calculations—learn more here.
Customers on Gusto's Plus and Premium plan have access to HR Pros who can help navigate tricky wage/hour rules—upgrade your plan at any time.
The table below shows the supported custom earning types in the Gusto app.
Once you've set up custom earnings, they'll show up in the run payroll flow for your employees under "Additional Earnings".
Each earning type has its own description to help you determine if it's the right one for your payroll situation. If you’re not sure, you can categorize an earning type as “Other” and select if it should be included or excluded from the overtime calculation.
Earning | Description | Included in OT calculation |
Commission | Payment can be the sole source of income or paid in addition to a base salary or hourly rate (as incentive-based pay). | Yes |
Discretionary bonus | Payments are dependent on the quality, quantity, or efficiency of production or hours. | No |
On-call pay | Payment for waiting for work (while on employer's premises or at a prescribed workplace). | Yes |
Other *This earning type allows you to choose to include or exclude it from the OT calculation |
Any other custom earning type that's not otherwise categorized. | Dependent* |
When naming your earning type, it must be named something different from Gusto's default earning types. You'll get an error if you try to name your custom earning one of the following:
You can create as many custom earning types as you'd like, and they'll be available for all employees on all payroll runs.
Now when you enter wages in a regular, off-cycle, or bonus payroll, you'll see this custom earning type in the “Additional earnings” column. If you’re using the payroll spreadsheet in a regular payroll, you’ll see a column specific to custom earnings.
Note: If other earning types have been used in the past, the new custom earning type may appear within “Other Earnings” in the dropdown elections.
Q: Can I edit the name of an earning type or disable an earning type after it's been created?
A: Yes. Under the "Actions" column next to the custom earning name, click the three-dot menu and select edit.
Q: If I disable an earning type, will it still appear on employee paystubs and in reports?
A: Yes.
If your employee regularly receives additional compensation, you can add this to their profile so you do not have to enter it each time you run payroll.
Note: Recurring payments cannot be set up for contractor payments.
This amount will be added to each future regular payroll.
You can cancel a scheduled change until you run a payroll with the new compensation.
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.
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.