Payroll: What Is It?

payroll acronyms

Per federal law, these hours are paid at 1.5 times the employee’s regular hourly pay rate. California law, however, requires double-time pay for all hours worked over 12 in a day and for all hours worked over eight on an employee’s seventh consecutive day of work. You’ll hear this thrown around quite a bit and also referred to as FLSA.

payroll acronyms

Deductions – Deductions are amounts taken from the employee’s paycheck (not to be confused with taxes). These items can be considered pre-tax or post-tax, depending on the actual deduction. Gross pay is the amount of an employee’s paycheck before payroll deductions are withheld. For hourly employees, this is their hourly rate multiplied by the number of hours they’re being paid for the period—plus any overtime, bonuses, and additional pay. Base pay is the minimum amount of money an employee is paid, usually in the form of a fixed salary or regular hourly rate. It does not include any extra payments an employee may receive, such as overtime pay, commission, bonuses or benefits.

Life at Paylocity

Not all wages are taxable; for example, an employer’s contribution to an employee’s health insurance premiums is not taxable. The U.S. Department of Labor reduces the credit reduction for businesses in states that are late on repaying federal advances to fund their state unemployment general ledger vs trial balance program. For the past few years, the Virgin Islands has been the only state or territory designated as a credit reduction state. Most businesses qualify for a 5.4% FUTA credit reduction after paying their state unemployment taxes, bringing the FUTA tax rate down to 0.6%.

  • W1 is the total salary, wages and other payments from which you are usually required to withhold PAYG.
  • They must be over a standard salary level of $684 a week ($35,568 a year for a full-year worker) to be exempt.
  • This can be an hourly rate, a daily rate, a piece rate, or salary per pay.
  • A closely held payee or employee, is someone who is directly related to the business that they are paid by, or not ‘at arms length’.
  • This renews each 12 months but doesn’t accumulate from year to year if unused.
  • Payroll accounting and payroll processing is a complicated but extremely critical part of a company.

The payment is considered fully taxable for the first six months, then becomes exempt from FICA and FUTA if the payments continue into the seventh month and beyond. These payments need to be shared with the employer and recorded on the employer’s tax returns, including employee W-2s. As part of a compensation package, many employers offer paid vacation, sick, and personal time. Often employers choose to allow the employee to earn (or accrue) a certain amount of time per pay period.

Small Business Payroll Glossary

In exchange, these employees must abide by company rules such as when and how to work. Payroll deductions are all the taxes, benefits, and other payments taken out of an employee’s paycheck. It’s the difference between an employee’s gross pay and net pay. Federal Insurance Contributions Act (FICA) taxes comprise Social Security and Medicare taxes. They’re payroll taxes that both employees and employers pay based on eligible employee compensation.

Her experience has allowed her to learn first hand what the payroll needs are for small business owners. Net pay is the final amount you pay your employees for their work, after all deductions have been made. Either way, your organisation’s payroll performance requires everyone on the team to have a working knowledge of UK payroll terms. Get your free, comprehensive A to Z of payroll guide to help you understand key terminology and the basics of payroll, so you can confidently meet compliance requirements.

Professional Employer Organization (PEO)

This program has greatly reduced costs for employers while making it easier for individual taxpayers to get their taxes in on time. The IRS defines an independent contractor as any worker who is self-employed, as opposed to traditionally employed by a company. In terms of payroll, independent contractors are significant in that they do not require money to be withheld for Social Security or Medicare.

payroll acronyms

Taking on payroll management responsibilities for a small business introduces a world of new challenges. It also adds a new language of sorts, given all the payroll acronyms. When managers prioritize employees who work physically near them versus hybrid or remote workers. A daily allowance paid to employees to cover the cost of travel-related expenses for work.

Reasonable Basis

Try OnPay out yourself to see how easy payroll and HR can be. To get started, just share a few basic details about your business. Our team of pros will set everything up and import your employees’ information for you. While these are useful basic terms to know, the ins and outs of payroll processing are far more complex and definitely require more thorough knowledge. For more than 30 years, Paycor has maintained a core expertise in payroll, tax filing and compliance. If you don’t want to go it alone, you can entrust your payroll to the experts at Paycor.

Variable pay

Leave can be annual leave, personal/carer’s leave , compassionate leave just to name a few. The leave request is then approved by the relevant manager so that it can be processed in the pay run. An Income Statement is a report provided to the employee at the end of the financial year to provide the yearly totals for wages, tax and superannuation.

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