The total financial and nonfinancial compensation an employer pays an employee for work performed. An application that employers use to automate, manage, and streamline payroll processes, including wage payment and tax reporting. Money an employee earns upon completing a task — typically for selling a specific amount of employer goods or services.
Exempt vs. Non-Exempt Employees
For example, during payroll processing, the employer transfers funds from the company’s bank account to each respective employee’s bank account. 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.
- State laws, however, differ; for instance, California requires employers to provide at least 24 hours (three days) of paid sick leave each year.
- Note that some states require higher overtime rates and require overtime for daily hours worked over eight, so make sure you’re following your local regulations.
- Employees are workers formally hired to fulfill a specific position within a company.
- A state-administered program that provides partial wage replacement to employees who are unable to work because of an illness or injury.
- Many employers offer paid vacation, sick, and personal time, which is often earned on an accrual basis.
Search our glossary to get simple definitions of common payroll-related words, phrases, and acronyms. 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. Taxable, non-monetary compensation provided to employees as a fringe benefit. 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. An employer-provided benefit which is so small in value that accounting for it would be project accounting software for services administratively impractical or unreasonable.
Gross pay
A tip credit is a provision that allows employers to count a portion of employees’ tips toward their minimum wage obligations. Be aware, however, that not all states allow tip credits, and some states require higher tipped minimum wages than others. A shift differential is a premium amount you can pay employees who work outside of normal business hours. The additional pay is usually calculated as a percentage of the employee’s pay rate, like 30% extra, or a flat dollar amount, like an extra $3 per hour. Overtime pay is the additional hourly money you pay an employee in excess of their regular pay rate, usually for time worked over 40 hours in a seven-day period. Back pay refers to any wages owed to an employee for work previously performed but not paid at the time.
Unless specified in an employment contract or collective bargaining agreement, severance pay is not usually mandatory. An ACH is a computer-based electronic network for processing bank-to-bank wire how to start a virtual bookkeeping business and make $3,000 a month online transactions. These transfers often include payroll direct deposits as well as tax remittances.
Overtime (OT) Pay
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. An acronym for Automated Clearing House, ACH refers to an electronic network dedicated to credit and debit transfers. 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. Once you familiarize yourself with these key payroll phrases, you will feel like an expert next time you financial analysis run your payroll.
Payroll Processing
Allows an employer to cover the taxes owed on a bonus or fringe benefit paid to an employee. The “gross-up” increases the gross amount of the payment to account for the taxes that would normally be withheld. The federal employment tax reports that an employer must file periodically (e.g., quarterly and annually) with the IRS. The Electronic Federal Tax Payment System (EFTPS) allows employers to make federal employment tax payments electronically via the Internet or by phone. Includes missed payments, such as unpaid salary, regular hours, overtime, or commissions. A mechanism to factor in tip payments when calculating minimum wage.
