Payroll Terms: Glossary for Common Terminology Plus Acronyms

A term used in the Affordable Care Act for employers with 50+ full-time or full-time equivalent employees. A recordkeeping system used to organize, summarize, and store the company’s financial transactions, including payroll. Refers to when an employer pays its employees once every two weeks, such as every other Friday. 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 until they are able to obtain employment again. 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.

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Flexible Spending Account (FSA)

Social Security is both an employee withholding tax and an employer payroll tax. The employer is responsible for remitting a total of 12.4% of an employee’s taxable earnings to the IRS. They are permitted to take 6.2% from the employee as a withholding tax and “match” the other 6.2% as a payroll tax. There is a wage base limit, which means that the tax stops at a certain amount of wages for the year. A statement given to employees showing details of their wages received for the pay period, such as hours worked, total wages or salary, overtime, and bonus. Many states have laws dictating the minimum information that must go on a pay stub.

1. The process of verifying payroll transactions and ensuring they are accurate.
2. A framework to enhance employee representation and support across a broad spectrum of demographics.
3. The amount of federal income tax an employer is required to withhold from an employee’s wages.
4. The total value of non-cash compensation given to employees by an employer.

Form W-2

The legally-required amount an employer must withhold from an employee’s wages to satisfy a spousal support order from the court. 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.

Supplemental Wages

Additional compensation to motivate higher employee productivity and reward top performance. 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 administratively impractical or unreasonable.

Leased Employees

This tax is then used to fund such programs as Social Security and introduction to inventories and the classified income statement Medicare. The amount an employee pays in payroll taxes over the course of his or her career may be indirectly related to the level of benefits for which he or she is eligible. Disposable earnings refer to any wages that are left over after all government taxes and defined deductions have been taken out of the paycheck.

This includes the base pay plus any additional earnings like bonuses, vacation pay, and commissions. When an employee’s wages are garnished, he or she is forced to forfeit a given portion of the paycheck to a debtor. Garnishments are most common for employees who have failed to pay their debts (such as student loans) and for child support payments. Passed in 1938, the Fair Labor Standards Act (FLSA) instituted a number of regulations over working conditions designed to keep employees safe and fairly paid. This act mandates that all non-exempt employees working overtime (over 40 hours in a week) be paid time and a half.