The percentage of wages deferred by employees under a salary reduction arrangement (e.g.401(k) plan). The ADP is reviewed to see if a salary reduction arrangement meets the IRS qualification requirements.

Any hours that employees accumulate for use at another time in the form of earned vacation time or sick leave, for example.

Eligible employees can receive the earned income tax credit (EIC) when they file their tax return. Or, by completing Form W-5, Earned Income Credit Advance Payment Certificate, they can get a portion of the credit in advance with their pay. Form W-5 expires on December 31 of each year. A new form must be filed each year in order to continue receiving advance EIC in the next year.

The Affordable Care Act is a complex piece of legislation signed into law in 2010 that attempts to reform the healthcare system putting in place comprehensive health insurance reforms.

The amount an employee would receive if they were working full time for a full year. All hourly rates of pay for salaried employees are based on an annualized amount in the Payroll System, regardless of Full-Time Equivalent (FTE).

Amount of salary reduction to purchase a tax-sheltered annuity (TSA). This is a way to save additional money for retirement. Increasing your annuity will decrease the amount of taxes withheld.

Federal Reserve Bank or private financial institution acting on behalf of an association operating a facility that serves as a clearinghouse for direct deposit transactions. Entries are received and transmitted by the ACH under the rules of the association. 

Cash or non-cash awards to employees. Taxation depends on the value of the award or prize and other qualifications.

The Agricultural Employer's Tax Guide published by the IRS. The publication provides guidelines and instructions to employers about farmworkers' federal tax responsibilities, which are different than those of the regular employees (those that use the Circular E). Circular A includes the basic IRS rules for withholding and depositing tax and for filing employer tax obligations.

The Employer's Tax Guide published by the IRS. The publication provides guidance and instructions to employers about their federal tax responsibilities. It includes the basic IRS rules for withholding and depositing tax and for filing employer tax obligations.

Compensation calculated based on a percentage or dollar amount of each sale an employee makes. 

A set of guidelines used by the IRS that measures the control that an employer exercises over a worker. A worker that meets this test is considered to be an "Employee."

All cash and non-cash remuneration given to an employee for services performed for the employer.

A form of overtime awarded to nonexempt employees for hours worked over 40 hours in a week not by cash payment but by time earned which can be taken as leave time at a later date. 

The Fair Labor Standards Act places severe restrictions on the use of compensatory time to avoid paying overtime, although special exemptions are allowed for public sector employees.

It is often much less expensive for a business to use independent contractors to provide services because the taxing and reporting requirements are much less costly than they are for employees. So long as the independent contractor provides the employer with a valid taxpayer identification number, the employer’s only obligations are to give the contractor a form 1099-MISC at the end of the year stating how much the contractor was paid for the services rendered if the total was at least $600. Social security and Medicare need not be withheld from an independent contractor’s payments or matched by the employer. Also, no federal or state unemployment insurance taxes are required.

A professional designation obtained by successfully completing the certified payroll professional examination.

Most states regulate wages owed to deceased employees; federal income and employment tax treatment and reporting obligations for wages paid after an employee’s death depend on when the wages are paid in relation to the employee’s death. 

Any amount taken from an employee's paycheck each pay period. Deductions may include health or medical benefits, union dues, and so on.

Deduction codes require an established plan to take deductions out pre-tax (for example 401(k), cafeteria/125 plans, HRA). 

The postponement of a wage payment, generally used to describe the portion of wages that employees set aside for retirement, usually on a pretax basis.

A defined benefit plan (often called a pension) is a retirement account for which the employer pays all of the monies and has a set payout plan for retirement. 

A defined contribution plan (like a 401(k)) requires the employee to contribute from each paycheck; some employers match the employee’s contribution. 

The United States Department of Labor (DOL) is a cabinet-level department of the U.S. federal government responsible for occupational safety, wage and hour standards, unemployment insurance benefits, reemployment services, and some economic statistics; many U.S. states also have such departments. The department is headed by the U.S. Secretary of Labor.

The purpose of the Department of Labor is to foster, promote, and develop the wellbeing of the wage earners, job seekers, and retirees of the United States; improve working conditions; advance opportunities for profitable employment; and assure work-related benefits and rights. In carrying out this mission, the Department of Labor administers and enforces more than 180 federal laws and thousands of federal regulations.

The electronic transfer of payments to any bank in the U.S. which is a member of an automated clearing house.

A discretionary bonus is a form of variable pay; the amount, requirements, timing and announcement of the bonus should not be disclosed in advance, as this may appear to be a motivator or incentive implying that meeting certain levels would guarantee a bonus or reward.

The part of the employee's check remaining after deductions required by law (taxes). It is used to determine the amount of an employee's pay that is subject to a garnishment, attachment, or child support withholding.

The "duties test" is one way the FLSA distinguishes exempt from non-exempt employees. (See Salary Basis Test.) Some high-level, "white collar" employees are FLSA exempt if their duties are "executive," "administrative," or "professional" (and if they are paid "on a salary basis"). Executives are high-level employees whose primary job duties are to make discretionary, organization-wide policy decisions. Administrators are high-level employees whose primary job duties are to provide organization-wide support services involving discretion and policy-making. Professionals are high-level employees who are doctors, lawyers, or in other highly educated occupations. Job titles are not determinative, but actual job duties are. Most employees who are engaged in the "production" aspects of their businesses or agencies (i.e., who are involved in making or providing goods or services) are not exempt executives, administrators, or professionals. For example, operational ("street level") police officers are often non-exempt.

A tax credit that is available to low-income employees; it may be taken when the employee files their individual tax return.

The amount owed to an employee based on salary, hours worked, or other calculation routines, plus other types of compensation and holiday, vacation, and bonus pay.

Earnings codes must be defined and fall within federal and state regulations, and can include hourly, salary, overtime, holiday, and non-hour-related earnings (bonuses, commissions, or automobile allowances). 

Method of electronically transmitting payments, invoices, etc.

The 834 Transaction is the HIPAA-compliant Benefit Enrollment and Maintenance Transaction. Its purpose is to electronically transmit enrollment and dis-enrollment information to health insurance carriers.

The Electronic Federal Tax Payment System (EFTPS) is a program that allows employers and taxpayers to pay taxes by phone or online free of charge.

Generally used in the contact of the electronic remittance of federal/state taxes. Also, select wire transfers of money (benefits, certain vendors, etc.) made by the treasurer.

A worker performing services in exchange for compensation who meets the common law test. See also "Independent Contractor." Under Common Law, anyone who performs services for an individual or company (employer), where the employer can control what will be done and how it will be done. This applies even when you give the employee freedom of action.

Income that is withheld from an employee's paycheck for benefits and other authorized reasons.

These numbers are used for tax administration and must not be used for any other purpose. To ensure all payments are credited to the correct employer, each employer is assigned an Employer Identification Number (EIN). This number identifies an employer to the Internal Revenue Service and the Social Security Administration. The EIN is a nine-digit number displayed in the following format: 00-0000000.

The Employee Retirement Income Security Act of 1974 protects Americans’ retirement assets by implementing rules that qualified plans must follow to ensure that plan fiduciaries do not misuse plan assets. Under ERISA, plans must provide participants with information about plan features and funding and regularly furnish information free of charge.

ERISA also sets minimum standards for participation, vesting, benefit accrual, and funding. The law defines how long a person may be required to work before becoming eligible to participate in a plan, to accumulate benefits, and to have a non-forfeitable right to those benefits. It also establishes detailed funding rules that require plan sponsors to provide adequate funding for the plan.

Someone who works for you and is not an employee under the Common Law; for example, commission drivers, full-time insurance salespeople, or traveling salespeople. The company does not withhold federal income tax from the pay of statutory employees, whereas, they are subject to FICA and FUTA.

The employee type designates whether the employee is salaried, hourly, or exception hourly.

The U.S. Equal Employment Opportunity Commission (EEOC) is responsible for enforcing federal laws that make it illegal to discriminate against a job applicant or an employee because of the person's race, color, religion, sex (including pregnancy, gender identity, and sexual orientation), national origin, age (40 or older), disability or genetic information. It is also illegal to discriminate against a person because the person complained about discrimination, filed a charge of discrimination, or participated in an employment discrimination investigation or lawsuit.

Most employers with at least 15 employees are covered by EEOC laws (20 employees in age discrimination cases). Most labor unions and employment agencies are also covered.

The laws apply to all types of work situations, including hiring, firing, promotions, harassment, training, wages, and benefits.

A Back Office tool to help find out-of-balance tax types for YTD/QTD issues, used to identify whether a wage, tax, or deduction was set up incorrectly. 

Benefits that are not subject to FIT, FITW, FICA, or FUTA.

Classification of an employee whose job title and description do not allow for cash paid overtime or comp time. "Exempt" employees are paid an annualized rate for performing the whole job, not for actual hours worked; these employees do not track, earn, or receive overtime compensation.

Usually known as a personal withholding allowance, and not to be confused with number of dependents. You can usually claim one of the following: yourself and a spouse (0, 1, or 2), blind or over 65.

Each state has a range for employer experience rating each year based on the number of unemployment claims against the company. 

A federal regulation governing several time and labor issues. FLSA Overtime requires that all non-exempt employees be paid at a rate of time-and-one-half for all hours over 40 physically worked during a workweek. This requirement may be superseded by state or local laws when the lesser law is to the greater benefit of the employee, or by union contract. An FSLA Workweek is a permanently-established, regular workweek for a group of employees. The law also contains a number of other provisions such as the minimum wage and child labor.

A federal regulation that protects health benefits and job restoration for employees who must take a leave from work to care for themselves or family members. FMLA regulations contain provisions regarding employer coverage, employee eligibility and entitlement, notice and certification, continuation of health benefits, and job restoration.

Also called an Employer Identification Number (EIN). This is a nine-digit number issued by the IRS. The digits are arranged as follows: 00-0000000. It is used to identify the tax accounts of the employers.

In general, each quarter you must deposit income tax withheld and both the employer and employee Social Security and Medicare taxes (minus any Advanced EIC Payments.) This is normally associated with Form 941 and Form 8109.

FICA also refers to the combined taxes of Social Security, disability, and Medicare hospital insurance. It is the amount withheld from an employee's paycheck, which goes towards providing social security benefits. The amount withheld from each employee's paycheck is matched by a contribution from the employer. Both employee and employer contributions are deposited at regular intervals with a federal agency or designated bank.

FIT is the amount withheld from an employee's paycheck which goes toward their federal income tax liability at the end of the year.

Federal income tax that is withheld from wages at the time of payment. Also, it refers to wages and benefits that are subject to federal income tax withholding.

To provide income for terminated employees while they are trying to secure another job, a joint federal-state system of unemployment insurance has evolved. On the federal level, employer contributions in the form of unemployment taxes are required by the Federal Unemployment Tax Act (FUTA). The FUTA tax is paid only by employers and is calculated as a percentage of covered wages for each employee.

Employees select a filing status on Form W-4 to help determine withholding.

Specific flat rate from which the employer may withhold a percentage for federal income tax. Be sure to review the IRS Publication 15 for the current year. See also "Supplemental Wages."

Employer's use this form to report their annual Federal Unemployment Tax Act (FUTA) tax. Together with state unemployment tax systems, the FUTA tax provides funds for paying unemployment compensation to workers who have lost their jobs. Most employers pay both a federal and a state unemployment tax. Only employers pay FUTA tax. Employers should not collect or deduct FUTA tax from employees' wages.

Quarterly Tax Return for Household Employees.

Employer's Quarterly FICA and Federal Income Tax Return. Employers use this form to report income taxes, social security tax, or Medicare tax withheld from employee's paychecks, and pay the employer's portion of social security or Medicare tax.

A 1042-S Form is a year-end tax document given to a Non-Resident Alien who received wages protected by a tax treaty or received a Qualified or Non-Qualified Scholarship.

Refers to a set of forms that are used to show different types of income other than wages paid by companies to employees and contractors. These include: 1099-A, -B, -DIV, -G, -INT, -MISC, -OID, -PATR,-R, and -S. This form is used to report payments to independent contractors, rental property income, income from interest and dividends, sales proceeds and other miscellaneous income.

Federal Tax Deposit Coupon - This is a special form provided by the Federal Government that accompanies your deposit check.

"Exemption from Withholding on Compensation for Independent Personal Services of a Non-Resident Alien Individual" is an IRS-issued form that must be filed by any NRA claiming exemption from Federal income tax withholding based on a tax treaty.

Wages and Tax Statement: employers must file a form W-2 to report the total amount of wages paid and taxes withheld for each employee in a calendar year.

Document showing the number of employees and total amounts for accompanying W-2 forms sent to the government.

Employee's Withholding Allowance Certificate; the W-4 tells the employer how many withholding allowances the employee is claiming along with the employee's marital status. It also tells the employer if the employee claims exemption from withholding.

Earned Income Credit Advance Payment Certificate; must be filed by employees who want to take advantage of advanced EIC payments and attest to their eligibility for the advance payment.

Fringe benefits are additions to compensation that companies give their employees. Some fringe benefits are given universally to all employees of a company while others may be offered only to those at executive levels. Some benefits are awarded to compensate employees for costs related to their work while others are geared to general job satisfaction. In any case, employers use fringe benefits to help them recruit, motivate, and keep high-quality people. Here are common examples:

• De minimis Fringes - De minimis fringe benefits are low-value perks provided by an employer; de minimis is legal Latin for "minimal". Perks that are determined to be de minimis fringe benefits may not be accounted or taxed in some jurisdictions as having too small value and too complicated an accounting.
• Qualified employee discounts - Qualified employee discount means discount granted to employees and their families that does not exceed 20 percent of the price of qualified services or gross profit percentage of qualified property that are offered to customers of an employer. For a discount to be a qualified employee discount such discount must apply to qualified property or services that are offered for sale to customers in the ordinary course of business of an employer in which the employee performs his/her services.
• Working Condition - A working condition fringe benefit is an expense that would be deductible as an employee business expense if paid for by the employee. To qualify, an expense must be an ordinary and necessary business expense and must be properly substantiated with receipts and other documentation.
• Qualified transportation - Qualified transportation fringe benefits allow employees and employers to use pre-tax dollars towards commuting expenses. The amount of pre-tax dollars allowable varies based on cost-of-living adjustments by the IRS. In general, these benefits are completely optional and employers are not required to offer them. However, some cities with high commuter populations (e.g. New York City, San Francisco, Washington, D.C.) have laws that make it mandatory for employers to offer the benefit. The tax law defines qualified transportation fringe benefits as:
  • Any transit pass
  • Qualified parking
  • Transportation in a commuter highway vehicle between the employee’s residence and place of employment
  • Any qualified bicycle commuting reimbursement (Beginning 1/1/2018 employees are no longer able to exclude reimbursements for bicycles from their income.)
• No additional cost services - Services that are offered to customers in the ordinary course of business that can be offered to employees without incurring any substantial additional costs. Includes excess capacity services, such as airline, bus, or train tickets; hotel rooms; or telephone services provided free or at a reduced price to employees working in those lines of business. The benefit may not discriminate in favor of highly compensated employees.
• On premises athletic facilities - An employer can provide athletic facility to its employees tax-free provided that (i) the facility must be located on premises the employer owns or leases, and (ii) it is operated by the employer exclusively for the use of current or retired employees, their spouses, and dependent children. Partners in a partnership are treated as employees for this benefit.
• Qualified retirement planning services - You may exclude from an employee's wages the value of any retirement planning advice or information you provide to your employee or their spouse if you maintain a qualified retirement plan. Does not include services for tax preparation, accounting, legal, or brokerage services.

An involuntary transfer of wages to a creditor or other agency assigned to collect a debt.

Gross earnings are an employee’s total compensation before taxes and deductions. 

The compensation for services, including fees, commissions, fringe benefits, and similar items. See "Gross Pay."

The total amount received from the employer prior to anything being taken out for taxes or other deductions.

An IRS-allowed algebraic formula for determining the total taxable gross pay when the employer pays the employee's share of tax. Gross-up is also used when the net pay amount is known but the gross pay amount is not.

The total amount of regular wages and the fair market value of benefits provided to an employee by the employer.

The gross-to-net process calculates net pay by subtracting reductions and deductions from each employees' gross pay. Gross-to-net elements indicate which reductions and deductions should be taken.

HIPAA establishes national standards to protect individuals’ medical records and other personal health information and applies to health plans, health care clearinghouses, and those health care providers that conduct certain health care transactions electronically. Law passed in 1996.

HSA funds can be used for qualified medical expenses, are owned by the employee, and are often paired with a high-deductible health plan (HDHP). 

Holiday pay is paid time off for federal holidays; the FLSA does not require employers to give federal holidays off or pay for hours not worked. 

An employee whose wages are based on an hourly rate. Such employees are usually paid an overtime rate of time-and-a-half for hours worked beyond their regular weekly hours.

FLSA wages are determined by the number of hours an employee actually works. "Hours not worked" are not governed by the FLSA, even if they are considered "work time" or "paid time" by the employer. Thus, holidays, sick days, or other days off do not count as FLSA hours worked.

Employment eligibility verification form required by the Immigration and Naturalization Service.

The Immigration Reform and Control Act of 1986 (IRCA) requires employers to verify employees’ eligibility for employment in the U.S. Employers face stiff penalties for knowingly hiring individuals not eligible for employment. The key provisions of the law that affect employers are employer sanctions, anti-discrimination, and verification of eligibility.

The addition of the value of cash/noncash compensation to an employee’s taxable wages in order to properly withhold income and employment taxes from the wages.

Federal, State, and Local. In the United States, a tax is imposed on income by the federal government, most state governments, and many local governments. The income tax is determined by applying a tax rate, which may increase as income increases, to taxable income as defined. Individuals and corporations are directly taxable, and estates and trusts may be taxable on undistributed income.

A non-employee who provides services for the employer. The employer exercises no substantial control over who will do the work, when the work will be done, and how the work will be done.

An IRA offers employees greater control over retirement savings and access to tax advantages. 

These are deductions over which an employer or employee has no control. The employer is required by law to deduct a certain amount of the employee’s pay and send it to a person or government agency to satisfy the employee’s debt.

Processing of leave accruals is used to maintain employee leave balances. All leave benefit plans accrue leave by length of service or number of hours worked. Leave accrual processing is used to determine the employee's leave accrual award and resulting leave balance.

A temporary absence from work for a specific reason. Reasons include maternity, child care, death of a family member, etc.

An attachment or garnishment for a tax debt or court judgment.

Local taxes vary even more than state income taxes and are based on city, county, and school district taxes. The taxes may be based on work location, home location, and business location. Cities, counties, school districts, and other governmental authorities may have authorities to tax employee wages for local income tax. It is essential that our customers know their local tax requirements for each state they have employees working to ensure compliance with their tax laws and regulations.

An alternative method to filing paper returns and forms for employers with computerized payroll systems. The information is filed on magnetic tape or disks in a format specified by government regulations.

Money paid to reimburse employees for business use of their personal vehicles, typically calculated on a per-mile rate set each year by the IRS.

The lowest wage payable to employees in general or to designated employees as fixed by law or by union agreement.

Section 11048 of the Tax Cuts and Jobs Act suspends the exclusion of qualified moving expense reimbursements from an employee's income effective Jan. 1, 2018 through 2026. However, this exclusion is still available for the U.S. Armed Forces on active duty who move due to a permanent change of station due to military orders. Please see Moving Expenses in Publication 3, Armed Forces' Tax Guide for a more detailed outline of what constitutes a permanent change and what expenses are allowed by law to be excluded from income.

If a company is operating in more than one state, they may be faced with income tax withholding for the states they have employees working. It means they will be responsible for withholding and remitting income taxes for the employees in these states. This can be even more complicated when an employee lives in one state but works in another state. There are three basic rules that need to be followed.

• Withholding Rule No 1: Determine Residence
• Withholding Rule No 2: Reciprocity
• Withholding Rule No 3: Resident/non-resident taxation policies

Start by basing state income tax withholding on where the services are being performed. Generally, this can be applied to most states except where they have no state income tax which are listed in the State Tax Rules section.

However, there are three other withholding rules to be considered when the situation is not straightforward.

Example: An employee who lives and works in one state may still be a resident of another state; which is where Withholding Rule No 1 comes into play. This scenario, the employee may have income tax liability for the state of residency, and if you have operations in that state and meet certain other criteria, you may be required to withhold for that other state.

On the other hand if the employee lives in one state and works in another, each state’s laws of reciprocity (Withholding Rule No 2) and resident/non-resident taxation policies (Withholding Rule No 3) must be examined.

Also known as "take-home pay" - the portion of wages that remains after taxes and other deductions from pay.

In the United States, the Personal Responsibility and Work Opportunity Act of 1996 (the so-called Deadbeat Dads law) requires employers to report new hires to specified agencies within a pre-determined number of days from the hire date.

This is to facilitate the collection of child support and/or to uncover abuse in the state’s unemployment compensation, workers’ compensation, or public assistance programs.

The word “nexus” literally means “connection.” Nexus is a connection between a tax collector and taxpayer that subjects the taxpayer to the tax collector's rules and laws. For employment taxes, the physical presence of an employee working in that tax location is enough “nexus” to require withholding and or employer payroll expense tax.

IRS-prescribed tests to determine if employer-provided benefit plans disproportionately favor highly compensated or key employees of the employer.

Classifies an employee under FLSA guidelines as being eligible to earn overtime.

For federal income tax withholding purposes, a non-U.S. citizen who has not met one of the two residency tests and who is subject to U.S. taxes on income derived from U.S. sources. Any person in this country on a visa which is not issued as a resident alien or immigrant type.

A nondiscretionary bonus is the opposite of a discretionary one. The employer predetermines the specific criteria that is required to receive a bonus, and employees expect to earn the bonus if they meet the criteria.

Non-taxable compensation are wages given to an employee or individual without any taxes withheld (income, federal, state, etc.). However, most wages that you pay out to your employee(s) are taxable.

Off-cycle payroll runs are manual wage payments made outside of a company’s normal pay schedule. 

Generally, hours actually worked over 40 in a workweek that are payable at a rate higher than the regular rate (usually the statutory overtime rate of 1.5 x regular rate).

Depends on the individual state. The FLSA requires overtime pay only for hours physically worked over 40 in a workweek. Hours for which an employee is paid, but during which no actual work is done (e.g. paid sick day, paid vacation day, paid holiday, etc.) do not have to be counted when calculating the number of hours worked. The general rule under the FLSA is that all covered employees must be paid at least 1 1⁄2 times their “regular rate of pay” for all hours physically worked over 40 in a workweek. The employer is responsible for establishing its workweek, which is a regularly recurring period of 168 hours (7 consecutive 24-hour periods). The workweek does not have to be the same as a calendar week or begin at the start of a day. Employers may also establish different workweeks for different facilities or groups of employees, so long as each workweek remains fixed once it is established.

Has to be defined by each company. Some states have laws regarding sick leave. Paid time off pay provided to an employee is taxable and subject to federal income tax withholding and social security, Medicare, and FUTA taxes.

A child tax is a tax that is categorized under the parent tax. The parent and child taxes have the same tax account numbers. The rates for each tax may vary depending on the tax agency.

• An example is the Mississippi Unemployment tax type (parent tax) and the Mississippi Employer Training Contribution Tax (child tax). They both have the same tax account number. The MS UI tax rate varies. The MS ETC rate is the same for all customers.

The pay processed whenever a job record has an effective date in the middle of a pay period. Typically, this happens whenever you hire, terminate, transfer, or change the rate of pay for an employee mid-period.

Formula which calculates an employee's gross to net.

A set of employees grouped together for payroll processing.

The frequency that the employer elects to pay wages and benefits (e.g., weekly, biweekly, or monthly). The established time segments for which employees in a pay group are paid. Pay periods are defined by their beginning and ending dates.

Includes the record keeping, new employee reporting, check processing, state and local tax compilation, and payments.

Payroll taxes are those required by FICA that employers must withhold from employee wages and pay on their behalf. These taxes include federal income tax, federal unemployment tax, Social Security tax, and Medicare tax. 

A retirement plan that requires an employer to make contributions into a pool of funds set aside for a worker's future benefit. The pool of funds is invested on the employee's behalf, and the tax exempt earnings on the investments generate an income benefit to the worker upon retirement.

A deduction from pay that does not reduce the taxable wages (also called an "after-tax deduction"). It is taken out only after all applicable taxes and other deductions have been withheld (e.g., union dues, garnishments, charitable contributions).

A deduction taken from gross pay that reduces the taxable wages.

A correction to previously reported time or task information, or an insertion of time or task information that may require the original report to be offset (reversed) and the correct information to be recorded.

Normally associated with Form 941. All employers who are subject to federal income tax withholding or Social Security and Medicare taxes must file Form 941 each quarter.

Immediate processing. The computer response is received immediately and is immediately available to the user.

Taxing entities enter into agreements to not impose income tax on each other's residents. All states require the employer to have certificates of non-residency on file. Agreements are subject to change, so review the state employer withholding guide for the current tax year.

An employee's normal (scheduled/shift) work hours.

Retroactive pay is payment outside of the originally scheduled pay period when compensation for prior hours worked was missed; it can apply to hourly wages and overtime earnings. 

Rounding to the nearest dollar is permitted. Employers may round off the withholding amount to the nearest dollar (not necessary under the wage bracket method, where table amounts are given in whole dollars). Rounding is accomplished by increasing amounts of $0.50 or more to the next whole dollar, and by dropping amounts under $.05 (e.g., $1.52 is rounded to $2, $1.48 is rounded to $1.00). If an employer used rounding, they must be consistent in doing so.

An employee who is paid a fixed salary for a certain time period. Salaried employees are usually not subject to overtime pay and a daily time card is not filled out.

An employee who is paid on a salary basis rather than an hourly basis. However, overtime pay must be paid to the employee based upon responsibilities of the position.

The "salary basis test" is one way the FLSA distinguishes exempt from nonexempt employees. (See also "Duties Test.") The salary basis test has been used to obtain overtime compensation for employees who might be considered exempt because of their "white collar" job duties. To be exempt, an employee must be paid "on a salary basis." This means, (a) they must receive a guaranteed minimum amount in every paycheck no matter how many hours were worked, and (b) the employee's pay may not be "subject to" reduction based on quality or quantity of work performed. Employees who are subject to suspensions without pay or layoffs are not paid on a salary basis, and are therefore nonexempt, no matter what their job duties are. For example, police officers who are subject to suspension without pay for disciplinary violations of department rules and regulations are usually non-exempt, regardless of rank.

When employees are terminated through no fault of their own, they may be eligible for a special payment known as severance pay. This is designed to tide recently terminated employees over they until they are able to obtain employment again.

The extra pay an employee receives for working on a certain schedule such as evenings.

Sick leave is an absence from work due to illness, injury, or disability. Fair Labor Standards Act (FLSA) regulations do not require employers to offer paid sick leave. The Family and Medical Leave Act (FMLA) requires covered employers to provide paid sick leave for short-term health needs and preventative care.

Pay given an employee for a time period not worked due to illness or injury.

A general term describing taxes paid for a variety of old age and retirement benefits. There are two types of social security taxes: OASDI (Old Age, Survivor, & Disability Insurance) and Medicare (HI - hospitalization insurance). Be sure to review the IRS Publication 15 for the current percentage rates. In 1991, the IRS required employers to report the two taxes separately. Employers must usually match this deduction.

The United States Social Security Administration (SSA) is an independent agency of the United States federal government that administers Social Security, a social insurance program consisting of retirement, disability, and survivors' benefits. To qualify for most of these benefits, most workers pay Social Security taxes on their earnings; the claimant's benefits are based on the wage earner's contributions. Otherwise benefits such as Supplemental Security Income (SSI) are given based on need.

The unique number assigned by the Social Security Administration as an individual's taxpayer identification number. It consists of nine digits (000-00-0000).

Standard hours designate the number of hours defined for a normal workweek. Typically, a normal workweek consists of 40 hours.

Some states offer state disability insurance to partially replace wages for workers who are very ill, injured off the job, and unable to work.

There are some states with established disability and family temporary leave plans to which employees and/or employers contribute. These plans provide wages in the event if an employee becomes ill or injured on the job.

Most states require employers to make deductions from employee's paychecks for state income taxes. Each state has its own tax rates and procedures, and there is little or no consistency from one state to another. Several states have no state income tax at all.

All states require employers to contribute to unemployment insurance programs. Several states also allow an employee deduction as well. Each state sets its own rate and taxable wage limit.

The regular rate of pay for all non-overtime hours of work.

Compensation received by employees other than their regular pay, such as bonuses, commissions, and severance pay. Income tax may be withheld from such payments at a flat rate under certain circumstances.

Be sure to review the IRS Publication 15 for the current year.

State Unemployment Insurance. An amount that must be paid into a state government unemployment fund by an employer for each employee. The payment is taken as a certain percentage of an employee's earnings, up to a certain ceiling. An employer's SUTA contributions can also be credited against their FUTA tax.

Requires employers to deduct an amount of money that the employee owes, plus any penalties and interest payments, from the employee's wages and remit to the proper government agency.

How taxes are handled, either pre or not-pre tax. Tax treatments include anything you can be taxed on, including regulations on when taxes should be collected:

• Benefits, wages, bonuses, etc. all need applicable tax treatments.
• Non-hour-related is usually different than most other treatments.

Taxable compensation, in payroll, is the sum of all earnings by an employee that is eligible for a particular type of tax. Each tax is different and has different regulations about limits to the number of wages that can be considered taxable with respect to that tax.

In the United States, contributing to a 401(k) account will cause one's taxable wages to be lower than gross wages. Some taxes, such as Social Security, have other exemptions.

The maximum amount of wages subject to withholding taxes.

A social security number or employer identification number, which serves as the taxpayer’s account number with the IRS.

Third-party access is the process by which we request our customer's permission to access their online tax accounts by submitting a completed power of attorney form to the tax agency, requesting access on the tax agency website, and/or the customer granting us access to the tax agency website. This access allows us to file and pay taxes on behalf of our customers, monitor their accounts, and verify tax information (rates, frequencies, payments, and out of balances.)

Payments made to employees on leave through a third-party vendor are required to be reported on the W-2 and taxed if applicable. 

Paid time off for vacation. Amount paid to an employee for time on vacation. Can also be referred to as PTO or Paid Time Off.

Wage and Tax Statement. The form used to report wages, tips other compensation, withheld income and social security taxes, and advance earned income credit payments to the IRS, the Social Security Administration, and the employee.

Area of W-2 where you show the amount of dependent care benefits paid or incurred by the company for the employee. This includes the fair market value of the employer-provided or employer-sponsored daycare facilities and amounts paid for the services.

Wages that are subject only to Medicare taxes. For example, a 401(k) plan is not subject to federal and state withholdings but is subject to Medicare and Social Security taxes. 

Unlike tax-deferred plans, these plans do not qualify for tax-favored status. Any amount deferred under a non-qualified plan should be included as social security and Medicare wages.

The amount of tips that are subject to Social Security tax. If you make less than a certain amount of tips, they are not subject to Social Security tax.

Wages that are subject only to Social Security taxes. For example, a 401(k) plan is not subject to federal and state withholdings but is subject to Social Security and Medicare taxes. Social Security also has an annual limit which changes each year, so if someone makes more than the limit within a calendar year, the rest of the wage will not be subject to Social Security tax. This will then show total wages as one figure and the Social Security wage as a different figure, reflecting the total wage at the time the Social Security Maximum was reached.

Employee's Withholding Allowance Certificate. Required by Federal law to be on file with the Payroll Office before any salary or wage payments are made. 

An involuntary transfer of wages to satisfy a debt.

A procedure for determining the amount of income tax to be withheld using wage-bracket tables. These tables are usually classified by payroll periods, the employee's marital status, withholding allowances, etc. To find out how much to withhold, the employer determines the employee's wages and uses the appropriate wage bracket table for the period.

Amount earned by an employee, before tax withholding and deductions, for a certain period of service.

Amounts deducted from an employee's wages for federal, state, and local taxes.

Workers can be defined as anyone who performs functions for the organization and receives compensation from the organization's operating expense funds in return. Workers can be direct employees or independent contractors (includes individuals contracting business directly from the company or through an agency).

All employers have to have this. Workers' compensation is a form of insurance providing wage replacement and medical benefits to employees injured in the course of employment in exchange for mandatory relinquishment of the employee's right to sue his or her employer for the tort of negligence. The trade-off between assured, limited coverage and lack of recourse outside the worker compensation system is known as "the compensation bargain". One of the problems that the compensation bargain solved is the problem of employers becoming insolvent as a result of high damage awards. The system of collective liability was created to prevent that, and thus to ensure security of compensation to the workers. Individual immunity is the necessary corollary to collective liability.

Any 7 consecutive days or 168 consecutive hours. The workweek is the basis for determining the total overtime pay that is due employees under the FLSA.

Selected dollar and hour balances computed since the start of the calendar year or since the start-up of the balance, whichever is most recent. These balances are zeroed before the start of the next calendar year.

Refers to a set of forms that are used to show different types of income other than wages paid by companies to contractors.

This is a qualified pension plan if certain federal requirements are met. These include minimum participation requirement, minimum vesting standards, contribution limits, and nondiscrimination rules.

An optional means of saving money for retirement. Money is deducted from each paycheck, pre-tax, and deposited in an account that is set aside until the employee retires. PERA, 401(k) Voluntary Investment Program (VIP) (PERA members only) is a 401(k). Please refer to the IRS website for current rates. 

Example: John has designated that 12% of his gross earnings will be deducted from his paycheck and deposited in his 401(k) account. He does not pay any taxes on the money until he withdraws it. Money from the account is then invested in a number of interest accruing funds.

Tax Sheltered Annuities. An annuity or mutual fund that provides retirement income for employees of public schools and certain tax exempt organizations.

A deferred compensation plan that provides retirement income for employees of public sector employers (e.g., state and local governments) and certain tax exempt organizations.