A type of ACH payment that allows employers to transfer employees’ wages directly into their bank accounts, thereby avoiding paper checks. The basic salary or hourly wages paid to an employee in exchange for their services. It includes all financial compensation made directly, regularly, and consistently to the employee. An employment tax guide developed for employers by the Internal Revenue Service (IRS).
Tip credit
From accruals to W-2s and other related payroll abbreviations, this list will provide you with definitions and explanations for the most common payroll terms. A government-run program that gives short-term disability benefits to employees. The permanent termination of employees from a company, typically as a cost-saving measure. A third-party organization that partners with businesses to streamline HR and payroll tasks. A tool used to record and track an organization’s employee and contractor payment data. When employees receive the same pay despite having different levels of experience, skills, or qualifications.
A payment to an employee for their accrued, unused paid time off (PTO), typically upon leaving the company. An annual period during which employees can update their health insurance and benefits enrollments. A process in which employees are paid outside returns inwards or sales returns definition and journal entries the normal payroll schedule. A financial service that allows employees to access earned wages before their next scheduled payday. Withholding doesn’t have to be approved by employees because these amounts are required by law. But all deductions from an employee’s paycheck except for deductions ordered by a court must be approved by the employee in writing.
Federal Income Tax Withholding
If the company pays in arrears, the paycheck will be for the workweek that ended seven days before. If the company does not pay in arrears, then the paychecks will be for the current workweek, even though it hasn’t yet ended. Shift differentials are additional compensation for irregular shifts. Businesses often entice employees to work the graveyard shift by paying a few dollars more per hour or a percentage increase on their regular hourly pay. When an employee does not collect their paychecks after a period of time, the employer must follow the state’s escheat laws, which governs unclaimed property.
The amount an employer is required by law to take out of an employee’s wages for a specific payroll tax. Paycheck deductions that are subtracted from an employee’s wages before withholding applicable taxes. Pre-tax deductions include health benefits offered fob shipping point under a cafeteria/Section 125 plan.
Pay Periods
- These terms are the most important ones you’ll encounter as you begin to work on employee paychecks and start the payroll process.
- Discover the essentials of employee relations and why they matter, including practical examples and effective management strategies for your business.
- Child support is a garnishment that is often placed when couples divorce and one does not pay as agreed in a divorce decree.
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- A process in which employees are paid outside the normal payroll schedule.
Bonuses include holiday, signing, referral, and retention bonuses. Most bonuses are discretionary, meaning they are given at the sole discretion of the employer and not because employees expect to receive them. In payroll processing, withholding involves deducting money from an employee’s salary to fulfill government requirements. Under normal circumstances, payroll processing takes place at the predetermined end of a pay period.
Timesheet
The amount an employer deducts from a noncustodial parent’s wages to satisfy a child support order from the court. statement of owners equity Payroll is one of the most crucial aspects of running a business — but it’s far from easy trying to learn and remember payroll terminology and jargon. If you’ve found yourself struggling to remember payroll vocabulary, don’t fret.
Payment made to an employee to cover time away from work due to falling ill. Refers to when an employer pays employees twice per month, such as on the 15th and last day of the month. A recordkeeping system used to organize, summarize, and store the company’s financial transactions, including payroll. Simplified employee pensions or SEPs are similar to IRAs but differ in that they allow employees to make contributions above and beyond the usual IRA limits. When hiring independent contractors, employers must be able to provide proof, or reasonable basis, that the contractor label is actually justified.
The chosen pay period is defined by its beginning and ending dates. A non-exempt employee is entitled to overtime pay when they work more than 40 hours in a week. Overtime pay is equal to 1 ½ times the employee’s regular rate of pay. Taxable wage base is the maximum amount of employee compensation subject to Social Security, FUTA, and state unemployment insurance taxes. Take-home pay is the employee’s wages that remain after all normal deductions and taxes are taken out.