Disposable earnings refer to any wages that are left over after all government taxes and defined deductions have been taken out of the paycheck. 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 taxable income. Examples are retirement plan contributions and some health care costs. Paid time off is the time your employees don’t spend working but still earn a paycheck (at their regular pay rate). It consists of any paid leave, like vacation or sick time, and even jury duty and holidays.
FMLA Requirements for Small Businesses
A high-deductible health plan (HDHP) is a health insurance plan that has lower premiums and higher deductibles the 5 best tax software for small business of 2021 than a typical health insurance plan. Payroll Dictionary is a free resource and reference for payroll terminology and definitions. No matter how long we work at a job, there come times when we struggle to remember certain work related words or definitions. Whether you are learning payroll or have been working in payroll for many years, we hope that this Payroll Dictionary will be of service to you. If you are a new business owner, you may come across specific payroll terms that you should understand. Read on to understand these payroll terms and acronyms so that you are familiar with them.
Employee’s Withholding Allowance Certificate (W-
- 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.
- The employer then uses Form W-4 to calculate how much of an employee’s salary is withheld for tax purposes.
- Net pay is the final amount you pay your employees for their work after all deductions have been made.
- Applies to employers who must withhold local taxes from employees’ wages and/or pay their own share of local employment taxes.
- Some employees earn commissions in addition to their base pay, while others receive only commissions.
Payroll accounting and payroll processing is a complicated but extremely critical part of a company. Many companies choose to outsource their payroll accounting to outside business accountants. As such, there is a big opportunity to get into the business of offering payroll outsourcing to companies in your area. To get going as quickly and successfully as possible, you may want to invest in a payroll accounting franchise such as Padgett Franchises.
Additional pay an employee bottom line receives on top of their regular wages or salary, often as an incentive or reward for good performance. Most bonuses are discretionary, meaning they are given at the sole discretion of the employer and not because employees expect to receive them. A network that enables the electronic transfer of funds, from one bank account to another.
Federal Unemployment Tax Act (FUTA)
This program has greatly reduced costs for employers while making it easier for individual taxpayers to get their taxes in on time. For employees working on a part-time or hourly basis, the annualized salary is a calculation of the amount any given employee can expect to earn in a single year. Exempt means “exempt from overtime.” Exempt and non-exempt irs releases draft version of form 1065 instructions employees are categorized typically by the work they do. Most exempt employees work in professional, managerial, or executive positions, sometimes referred to as a “white-collar exemption.” Withholding doesn’t have to be approved by employees because these amounts are required by law.
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. Gross pay is the worker’s hourly rate times the number of hours worked in that pay period for hourly employees. Social Security is both an employee withholding tax and an employer payroll tax.
Federal law doesn’t have strict guidelines or requirements regarding PTO; you choose whether you want to offer paid vacation time or not. Accruals also often happen as part of an employee benefits package. Many employers offer paid vacation, sick, and personal time, which is often earned on an accrual basis. A pay period is the time frame of work for which you’re paying an employee. If you pay every other Friday, the pay period could be from the prior two weeks, with the last day being the Friday that’s also payday. Timesheets record the number of hours worked by an employee, serving as the basis for calculating wages, especially for hourly employees.
Base pay rate is the wage that has been agreed upon to be the starting point for employee earnings. This can be an hourly rate, a daily rate, a piece rate, or salary per pay. Flexible Spending Accounts (FSA) and Health Savings Accounts (HSA) are tax-advantaged accounts for medical expenses. FSAs are employer-established, whereas HSAs require a high-deductible health plan. Offering these benefits can make small business employment packages more attractive. Severance pay is compensation offered to employees upon termination of employment beyond their final paycheck.