Learn more about earned wage access and payroll trends shaping the future of employee compensation. Enables employees to receive early access to earned wages, instead of having to wait until the regular payday. The minimum hourly rate an employer is allowed to pay nonexempt employees under federal, state, or local law. Allows an employer to cover the taxes owed on a bonus or fringe benefit paid to an employee. Federal income tax withholding is based on the employee’s Form W-4 and the IRS’ withholding tax tables. The Electronic Federal Tax Payment System (EFTPS) allows employers to make federal employment tax payments electronically via the Internet or by phone.

After-tax deductions include wage garnishments and Roth 401(k) contributions. When an employee’s gross pay is deducted and sent to a creditor to pay off that employee’s debt. An external partner that manages key tasks for insurance plans and employee benefits. A worker classification with a combination of employee and contractor tax withholdings. A state-based payroll tax that funds unemployment efforts for what are the three types of accounts those without a job. Required payments to a state government based on taxable income earned in a single year.

The employer assigns/allocates an additional amount in tips on the W-2 of employees whose reported tips are less than 8% of the total gross sales. The payments are made through a third party, such as an insurance company, instead of directly through the employer. Includes overtime pay, bonuses, commissions, retroactive pay, accumulated sick leave pay, and severance pay. It also applies to other types of regular wages, such as holiday and vacation pay.

Electronic Federal Tax Payment System (EFTPS)

A digital system that securely stores, organizes, and manages workforce information. A framework to enhance employee representation and support across a broad spectrum of demographics. A benefit allowing workers to set aside income for dependent care costs, such as daycare. A financial mechanism designed to help income keep pace with rising costs of goods and services. A process that matches and aligns business credit card transactions with internal records. An HR metric used to assess employee growth and movement within an organization.

The Electronic Federal Tax Payment System (EFTPS) was created in hopes of automating the otherwise clumsy process of handling physically mailed tax payments. This amount is then used to determine the level of pay subject to garnishment or child support withholding. Most often, deductions are made for items such as health benefits and union dues. This professional designation is provided for those who successfully complete the certified payroll professional examination. In terms of payroll, independent contractors are significant in that they do not require money to be withheld for Social Security or Medicare.

Earnings

These include federal taxes like Social Security (FICA), Medicare (FICA), and Federal Unemployment Tax Act (FUTA) taxes, as well as various state and local unemployment, disability, and income taxes. Pay frequency, or pay period,  refers to how often employees are paid. ➡️ To learn more about payroll tax forms, head over here! It also impacts your employees’ ability to file their taxes correctly, which can lead to frustration and a lack of trust. Form W-2, Wage and Tax Statement, is an annual IRS form that employers must provide to each employee by January 31st of the following year. Inaccuracies at this stage ripple through the entire payroll process, leading to incorrect net pay, improper tax withholdings, and potential compliance issues.

Accounting Cycle

• The Federal Insurance Contributions Act (FICA) mandates a payroll tax to be imposed on both employees and employers.
• Refers to when an employee receives a bigger paycheck than they should.
• Compensation that an employer provides to terminated employees, typically those who are discharged through no fault of their own (e.g., layoff).

This section includes other specialized terms essential for payroll management and compliance. These foundational terms cover key payroll concepts, payment practices, and regulatory frameworks that every payroll professional should know. While you can use tools like Leapsome’s HRIS with payroll features to automate payroll operations, understanding these key terms will enhance your confidence in managing payroll effectively. This glossary is tailored for HR professionals working within the United States and includes essential payroll terms that every US-based HR professional should know. The remittance of taxes owed to tax authorities. The total amount of tax owed by an individual or business to tax authorities.

• Under federal law, a tipped employee is an employee who frequently and customarily receives over $30 monthly in tips.
• A framework establishing the maximum and minimum pay a group of similar roles can earn.
• This is the money that gets deposited into their bank account or paid via check.
• Deductions are amounts subtracted from an employee’s gross pay.

Employees use their W-2 to file their individual income tax returns. Accurate withholding is essential for meeting IRS and state tax requirements. Employers are legally obligated to withhold the correct amounts based on employee-provided information (like Form W-4). From a compliance perspective, miscalculating net pay implies incorrect deductions, which can trigger audits or penalties.

Social Security

Survey employees and surface AI-powered insights. If you don’t want to go it alone, you can entrust your payroll to the experts at Paycor. 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.

Compensation paid to an employee in addition to their regular wages, such as bonuses, commissions, overtime pay, and severance pay. Social Security tax is withheld at a rate of 6.2% from employee’s wages up to the annual taxable wage base, with an equal amount paid by employers. Taxes that employers must withhold from employee’s wages or pay based on employee compensation. The compensation received by an employee for services rendered, including regular wages, overtime pay, bonuses, and commissions. Nonexempt employees must be paid at least the minimum wage and receive overtime pay for hours worked beyond 40 in a workweek. Also known as take-home pay, net pay reflects the employees’ actual earnings after taxes, benefits, and other withholdings.

Child Support

​Payroll taxes are mandatory contributions withheld from employees’ wages by employers to fund government programs. The series of tasks involved in calculating employee’s wages, withholding taxes, making deductions, and distributing payments. Medicare taxes are withheld from employee wages under FICA, with both employees and employers each contributing 1.45% of the employee wages. FUTA tax is paid by employers only and is not withheld from employees’ wages. A federal law that requires employers to withhold Social Security and Medicare taxes from employee’s wages.

EFTPS (Electronic Federal Tax Payment System)

A measurement of employee satisfaction based on their likelihood to recommend their employer. An employee’s entire time spent within an organization from initial hiring to final exit. The average number of days a business takes to pay suppliers for goods and services received.

The amount an employer is required by law to take out of an employee’s wages for a specific payroll tax. The maximum amount of an employee’s wages on which the employee or the employer must pay taxes. Refers to the state taxes an employer is required to withhold from employees’ wages, such as state income tax and SDI tax.

We’ve got a glossary filled with the most common payroll terms and easy-to-understand definitions. If you’ve found yourself struggling to remember payroll vocabulary, don’t fret. A conversation exploring why an employee stayed with an employer instead of looking for a new job. One-on-one meetings between employees and senior leaders for fostering transparency and trust. Compensation added to an employee’s paycheck to make up for a shortfall in a previous period.

A mechanism to factor in tip payments when calculating minimum wage. A specific amount that companies can subtract from the taxes they owe to the government. These wages may include tips, commissions and bonuses. This is designed to tide recently terminated employees over until they are able to obtain employment again. 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.

A type of benefits arrangement that allows workers to choose from several pre-tax benefits. Insurance that lets individuals temporarily keep employer-sponsored benefits after they’d usually end. ultimate profit tracker for your business It ensures that financial statements accurately reflect payroll costs and liabilities.

Straight-time calculation is typically used to determine payment for weekly work hours of 40 hours or less. The employment tax reports an employer must file capital expenditure and revenue expenditure examples with the state taxation agency. Depending on the state, SDI coverage may be funded by the employee, the employer, or both. Payment made to an employee to cover time away from work due to falling ill. Under the Fair Labor Standard Act’s salary basis rule, exempt employees generally must receive no less than $684 weekly.

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