Our team of pros will set everything up and import your employees’ information for you. We’ve also included clear examples and related resources so you can understand what all those acronyms and accounting terms mean. “In general, “hours worked” includes all time an employee must be on duty, or on the employer’s premises or at any other prescribed place of work. Also included is any additional time the employee is allowed (i.e., suffered or permitted) to work.” Defined by the United States Department of Labor.
Tax withholding
Refers to when an employer pays its employees once every two weeks, such as every other Friday. 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. 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. The SEP is the most popular IRA plan among self-employed workers.
Small Business Payroll Glossary
- 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.
- Under the Fair Labor Standard Act’s salary basis rule, exempt employees generally must receive no less than $684 weekly.
- Allows employees who live in one state and work in another to pay state income tax to their home state, instead of the state they work in.
- The expense can be subtracted from gross income to reduce the company’s taxable income.
Federal law protects an employee from being fired because their wages have been garnished for one debt, and it limits how much can be deducted from an employee’s paycheck each week. Other workers are considered non-exempt and you must pay them overtime. A worker is considered non-exempt and eligible for overtime unless an exemption can be proved by the employer. Withholding doesn’t have to be approved by employees because these amounts are required by law.
Health Savings Account (HSA) funds can be used for qualified medical expenses and are wholly owned by the employee. Those funds are not subject to certain taxes at the time of deposit. The W-3 form is completed by employers, and summarizes employee wages and tax information from the W-2 form. Also known as “Transmittal of Wage and Tax Statements”, it’s sent to the Social Security Administration (SSA) every year at the same time as the W-2. First passed in 1993, the Family Medical Leave Act (FMLA) allows employees to take leave from work in order to care for themselves or family members.
Social Security (OASDI)
Most salaried employees are exempt from overtime, but your business may be required to pay overtime to some lower-paid exempt employees. The calculation for net pay begins with gross pay, then amounts for federal and state income taxes are taken out, as well as FICA tax (Social Security and Medicare). Finally, discretionary deductions like health plan contributions and retirement plan amounts are taken out. 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.
Programs usually include printable tax forms and withholding tables. Most deductions don’t affect the amount of an employee’s taxable income, but some are considered pre-tax. These are subtracted from the employee’s gross income to reduce their how to calculate inventory purchases taxable income. Examples are retirement plan contributions and some health care costs. This information is provided with the understanding that Payroll Partners is not rendering legal, human resources, or other professional advice or service. Professional advice on specific issues should be sought from a lawyer, HR consultant or other professional.
From a payroll standpoint, ACH enables employers to pay their employees through direct deposit. A “tip credit” lets employers pay tipped employees less than the minimum wage if they make enough tips to account for the difference. A state payroll tax which is used to help fund the unemployment insurance system.
Salaried vs. Hourly Employees
Regardless of your level of involvement in payroll, there are certain payroll terms that you should know. Click through for a roundup of words that are commonly used in the payroll industry. Under federal law, a tipped employee is an employee who frequently and customarily receives over $30 monthly in tips. An allowance given to employees for travel-related business expenses, such as meals and lodging. A documented contingency plan for managing payroll when disaster or unforeseen emergencies strike.
Payroll is essentially an accounting practice but it deals with paying the people inside a company which puts it under the domain of human resources (HR). Internal payroll systems help companies keep confidential financial information private as well. Software programs can be time-consuming, however, and this can pose a problem for small companies without a lot of staff. Payroll can differ from one pay period to another because of overtime, sick pay, and other variables. Payment made to an employee to cover time away from work due to falling ill. Additional pay an employee receives for hours worked outside of normal business hours, such as evening or night shifts.
