Complete Glossary of 46 Payroll Terms for HR Professionals

An electronic network used for financial transactions in the United States, including direct deposits of employees’ pay. The ACA impacts payroll through reporting requirements and the employer mandate. Give them a platform that saves time for HR — and builds growth for employees. It’s a people-centered platform that’s easy for both employees and HR team members to use and is ideal for businesses of all sizes.‍

• Understand the components of employee compensation, from base pay to variable bonuses and benefits that make up total earnings.
• Failing to comply with tax laws can result in significant penalties; the IRS collected over $13 billion in payroll tax penalties in 2023 alone.
• The individual retirement account (IRA) offers employees greater control over their retirement savings.

Earnings

It ensures that financial statements accurately reflect payroll costs and liabilities. Failing to comply with tax laws can result in significant penalties; the IRS collected over $13 billion in payroll tax penalties in 2023 alone. In the U.S., many fringe benefits are taxable, while others qualify for tax-exempt status under IRS rules. In the U.S., federal law limits garnishments to 25% of disposable earnings or the amount exceeding 30 times the minimum wage, whichever is less. Miscalculating overtime is one of the most common payroll errors, leading to thousands of labor law violations annually. Compensation includes all forms of employee earnings, including salary, bonuses, commissions, and benefits.

Pay Frequency (Pay Period)

The amount an employee pays in payroll taxes over the course of his or her career may be indirectly related to the level of benefits for which he or she is eligible. The Federal Insurance Contributions Act (FICA) mandates a payroll tax to be imposed on both employees and employers. This program has greatly reduced costs for employers while making it easier for individual taxpayers to get their taxes in on time.

Pay Period

• The FLSA also established the federal minimum wage and provided several mandates related to child labor.
• A high-deductible health plan (HDHP) is a health insurance plan that has lower premiums and higher deductibles than a typical health insurance plan.
• For example, this could occur when an individual knowingly lies on their original claim or continues to accept benefits after they know they are no longer eligible.
• Employers must maintain employees’ health benefits during FMLA leave.

A common example in HR involves the appeals section of a state unemployment agency, where it accepts testimony and documents relating to the separation of a former employee (claimant) from their work. Under Title VII, it is illegal for an employer to discriminate against an employee or potential employee on the basis of genetic testing. Additionally, this status doesn’t necessarily mean an employee is free from every allowance for doubtful accounts: meaning accounting methods and more tax — such as the Social Security tax — but a specific deduction. The monetary value of this support is generally determined by the income of the individual the order is placed against.

FICA (Federal Insurance Contributions Act)

This is the maximum amount of an employee’s earned income that’s subject to state unemployment tax, federal unemployment tax and Social Security tax. Generally, an employer withholds income tax on these benefits from a worker’s usual pay for the period the benefits are paid or considered paid. The size of this contribution is determined by the company’s taxable payroll and its assigned unemployment tax rate.

Employee Compensation & Benefits

For employees working on a part-time or hourly basis, the annualized salary is a calculation of the amount any given employee can expect to earn in a single year. In payroll processing, an accrual occurs any time there is a difference between the pay cycle allocation and the actual expenses paid. A 401(k) plan allows employees what is a t account to contribute a portion of their salary on a pre-tax and/or post-tax basis for retirement. 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.

Save time, drive employee performance, and unlock manager insights. Survey employees and surface AI-powered insights. ‍Comprehensive human resources information systems (HRIS) like Leapsome’s can help you tackle payroll tasks, take care of core HR processes, and carry out meaningful people enablement and engagement initiatives. That’s where an intuitive, people-centered payroll tool can be transformative.

Comprehensive employment guides covering local labor laws, payroll, taxes, work permits and visas, leave and terminations in any country. This form also presents an employer’s full unemployment tax liability and any credit for unemployment taxes paid to applicable states. Employees receive payment through a state temporary disability plan, insurance company or union plan rather than their employer. A Social Security number, individual taxpayer identification number and employer identification number are all forms of TIN. This does not mean that the individual qualifies for all unemployment benefits of every applicable state, but it does help determine which benefits they should legally receive.

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For the purposes of unemployment benefits in certain states, a most recent employer may be qualified by how long, and to what extent, an individual performed work for it. This specifically references how an employer that paid the most wages during a certain period is also charged for all applicable benefits. Covered wages could also refer to a portion of an employees’ wages that a garnishment, child support or another court-ordered payment may affect. A common paymaster also allows for these related organizations to be considered a single employer to calculate Social Security and federal unemployment tax.

This law requires employers to verify the identity and employment eligibility of all regular and temporary employees. This rate is typically determined by a company’s ability to keep employees over a specific period and is often evaluated annually. While leased employees may perform services for the businesses they are lent to, they are still considered employed by the employee leasing company.

Payroll direct write off method accounting and payroll processing is a complicated but extremely critical part of a company. Learn more about Lift HCM’s payroll solutions today and ensure your business stays compliant and efficient. Failure to properly withhold and remit garnished wages can make the employer liable for the full amount of the debt, plus potential penalties and legal action from the creditor or government agency.

Employee pay-related terms

This is typically followed by a Form W-9 (for when the work begins) and a Form 1099 (to summarize all taxable income), rather than a Form W-2. Unlike other internal growth opportunities, a career ladder promotion doesn’t require employees to formally apply and compete for an advanced role. A business may produce a corporate accountability report, for example, to demonstrate how it adheres to ethical and compliance obligations. The Federal Unemployment Tax Act (FUTA) works in conjunction with state unemployment tax laws. A joint federal-state program that provides temporary financial assistance to eligible workers who lose their jobs through no fault of their own. A form or set of forms filed with tax authorities to report income, calculate tax liability, and request refunds if applicable.

With this retirement plan, employees can deposit funds and enjoy access to tax advantages. The individual retirement account (IRA) offers employees greater control over their retirement savings. Those funds are not subject to certain taxes at the time of deposit. Garnishments are most common for employees who have failed to pay their debts (such as student loans) and for child support payments. The form asks for details such as the employee’s marital status, number of dependents, and additional income. Unlike the Form W-2, Form 1099NEC does not require a company to withhold taxes or other deductions.

This document reports the employee’s total annual wages and other compensation, along with the amount of federal, state, and other taxes withheld throughout the year. Withholding is the process by which employers deduct taxes and other amounts directly from an employee’s paycheck. U.S. employers must report taxable income accurately on Form W-2 for employees and Form 1099 for contractors.

Base Pay Rate

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This shift can occur from amended quarterly tax filings, new or adjusted benefits, a dispute of how a company’s original tax rate was calculated and more. Compensation paid to an employee in addition to their regular wages, such as bonuses, commissions, overtime pay, and severance pay. Employers are required to withhold state income tax from employee’s wages in states that impose an income tax. An employer-sponsored benefit that allows employees to save for retirement on a tax-advantaged basis. Amounts withheld from an employee’s gross pay before taxes are calculated, reducing the employee’s taxable income.