28 Payroll Terms You Should Know
It includes all financial compensation made directly, regularly, and consistently to the employee. Includes missed payments, such as unpaid salary, regular hours, overtime, or commissions. The legally-required amount an employer must withhold from an employee’s wages to satisfy a spousal support order from the court. These employees are paid a salary (not an hourly rate) and must perform executive, administrative or professional duties. They are not paid overtime rates for hours exceeding 40 in a week. Payroll accounting and payroll processing is a complicated but extremely critical part of a company.
Independent contractor vs. employee
Refers to when an employer pays employees twice per month, such as on the 15th and last day of the month. An employee’s take-home pay, after mandatory and voluntary deductions. A paycheck issued to an employee outside of the normal payroll run. Additional compensation to motivate higher employee productivity and reward top performance. A recordkeeping system used to organize, summarize, and store the company’s financial transactions, what is insurance expense including payroll. Also known as a Federal Tax Identification Number, an Employer Identification Number is a unique 9-digit number assigned to a business by the IRS.
ACH accomplishes the electronic transfer of funds from one bank account to another. From a payroll standpoint, ACH enables employers to pay their employees through direct deposit. A 12-month period used to determine how often an employer must deposit employment taxes. Payroll accruals happen at the end of every accounting period — monthly, quarterly, or yearly — to reflect wages owed to employees and other payroll liabilities. Businesses that follow the accrual basis of accounting record journal entries at the end of the accounting period for expenses they’ve incurred but not yet paid. Not all wages are taxable; for example, an employer’s contribution to an employee’s health insurance premiums is not taxable.
What Is a Payroll Tax Cut?
Many medium- and large-size companies outsource payroll services to streamline the process. Employers track the number of hours each employee works and relay this information to the payroll service. The payroll service calculates the gross amount the employee is owed based on the pay rate and the number of hours or weeks worked during the pay period. The service deducts taxes and other withholdings from earnings and then pays the employees.
- The payroll service may also maintain a record of how much vacation or personal time employees have used.
- Temporary unpaid leave often required due to economic issues, lack of work, or other operational needs.
- For example, a weekly pay period may start on Sunday and end on Saturday.
- Temporary workers provided by an employee leasing company for a specific timeframe or project.
- Retroactive pay can apply to both hourly wages and overtime earnings.
Types of Work Shifts, Schedules, and Working Hours
Half is a direct expense to the company and the other half is withheld from the employee’s paycheck. Employers don’t match income tax deductions but they do pay federal unemployment taxes. The IRS’s Income Withholding Assistant will help you determine how much federal income taxes your employees owe.
The annual salary is divided by the number of pay periods in comparable store sales the year to determine gross pay for a pay period. Wage garnishment is a legal process that requires employers to withhold a specified amount of money from an employee’s paycheck and remit it to a third party. Garnishment is a tool that courts use to get people to repay debts, whether they’re unpaid child support or credit card bills. Non-exempt employees must be paid the minimum wage and are entitled to overtime pay for every hour worked above the standard workweek.
Year-to-earnings are typically reflected on the employee’s pay stubs. Money paid to an employee for work done in a previous pay period, such as a salary increase that was due in what is not sufficient funds the prior pay period. A zero-dollar ACH transaction to verify whether an employee’s bank account information is correct, prior to paying them by direct deposit.
In some cases, the FLSA may be superseded by state or local labor laws. Fringe benefits, also called imputed income, are the perks that businesses offer aside from regular wages. A state payroll tax which is used to help fund the unemployment insurance system. A few states, including New Jersey and Pennsylvania, require employees to pay SUTA via payroll deduction.
The federal, state, and local taxes an employer is required to withhold from employees’ wages. An employee’s minimum pay, such as their fixed salary or regular hourly rate. Base pay does not include additional compensation like overtime, benefits, or bonuses. Retroactive pay can apply to both hourly wages and overtime earnings.
