# How to Calculate Payroll Percentage for 401(k)

by Charlotte Johnson

A company's payroll is the total amount of money to be distributed to its employees over a specific period of time. One item that a company financial manager or accountant may have to calculate within the payroll distributions is the percentage of contributions to 401k accounts. A 401k is a type of deferred compensation retirement plan in which employees save a certain percentage of their income without having to pay taxes on the contributions. Many companies match up to a certain percentage of its employees 401k contributions.

1. Add the total amount of contributions by the company toward 401k funding. This depends on the company's individual policy, which may be affected by variables such as an employee's years of service. Many companies match up to a certain percentage of an employee's 401k contributions. For example, consider an employee who earns \$50,000 a year. If his company matches up to 6 percent of his earnings, the company would contribute up to \$3,000 toward the yearly 401k for this individual.

2. Divide the total 401k contributions by the total payroll expenses. For example, if a company pays \$25,000 per month in 401k contributions, and \$400,000 per month for total payroll, then divide 25,000 by 400,000 to get 0.0625.

3. Multiply the result from Step 2 times 100 to convert to a percentage. This would be the payroll percentage for 401k. In this example, you would multiply 0.0625 times 100 to get 6.25 percent for 401k contributions.

### Items you will need

• Calculator

#### Photo Credits

• Comstock/Comstock/Getty Images