Unlike employees, employers aren’t allowed to dictate how or when contractors complete their work. EFTPS stands for the Electronic Federal Tax Payment System, which is a free system offered by the U.S. Learn about the key terms and concepts that will help you to manage the complexities of payroll systems effectively, and to confidently meet compliance requirements. Get your free, comprehensive A to Z of payroll guide to help you understand key terminology and the basics of payroll, so you can confidently meet compliance requirements. Compensation is an overarching term that encompasses all the types of payments an employee earns. For example, say you hire Julie and say you’ll pay her a $50,000 salary.

  • This is the federal act that consists of numerous laws meant to assure that employees are treated well and paid fairly.
  • So, the first step is to develop these policies and get approval from the management on the same.
  • Paid time off is time your employees don’t spend working but still earn a paycheck (at their regular pay rate).
  • Software programs usually include printable tax forms and withholding tables.
  • Some hourly workers are not covered by the FLSA but are subject to other regulations.

For hourly employees, this is calculated by multiplying hourly pay with the number of hours, including overtime. Gross pay payroll term is the total salary that is dispatched to the employee in every pay period. We connect businesses with the industry’s leading, independent providers of employer services – everything from payroll to human resources and employee benefits. Federal Form W-4 or state equivalent is where the employee states the number of withholding allowances claimed to determine income taxes to withhold from the employee’s compensation. Understanding basic payroll terminology is essential to processing payroll successfully.

What Is a Payroll Tax Holiday?

The term OSPP replaces the old SPP (Statutory Paternity Pay). It would only be submitted for employers with 250+ employees. If you have less than 250 employees then the EAS is submitted automatically in your first FPS of the tax year. Employees pay NI contributions to build up entitlement to certain state benefits, including the State Pension. The contributions you pay depend on howmuch you earn and whether you’re employed or self-employed.

Payroll is the list of employees and workers a company must pay and the amount they will receive. It’s also the total amount of salaries and wages a company pays to its employees. Managing it using payroll software can make life much easier. Not all wages are taxable; for example, an employer’s contribution to an employee’s health insurance premiums is not taxable. The U.S. Department of Labor reduces the credit reduction for businesses in states that are late on repaying federal advances to fund their state unemployment program. For the past few years, the Virgin Islands has been the only state or territory designated as a credit reduction state.

How Much Will It Cost To Put My Employees On Payroll?

Payroll accruals happen at the end of every accounting period — monthly, quarterly, or yearly — to reflect wages owed to employees and other payroll liabilities. Businesses that follow the accrual basis of accounting record journal entries at the end of the accounting period for expenses they’ve incurred but not yet paid. Arrears payroll points to a accounting journal entries delayed payroll process where the business only pays employees once the pay period has ended, not before. Governments at all levels can impose payroll taxes to fund public programs like unemployment. 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.

Payroll Tax Form

Payroll taxes also pay for Medicare, which takes out 1.45% of your income. They pay 6.2% of your income, so the government gets 12.4% of your total income, and your employer pays 1.45% of your income toward Medicare. How you calculate payroll taxes will depend on your business and your local laws. However, here are some general guidelines provided by QuickBooks.

The Fair Labor Standards Act (FLSA) requires employers to pay employees regularly. Your pay-period options are weekly, biweekly, semimonthly, or monthly. The Electronic Federal Tax Payment System (EFTPS) was created in hopes of automating the otherwise clumsy process of handling physically mailed tax payments. With EFTPS, employers and taxpayers can pay their taxes by phone or online free of charge. This program has greatly reduced costs for employers while making it easier for individual taxpayers to get their taxes in on time. The IRS defines an independent contractor as any worker who is self-employed, as opposed to traditionally employed by a company.

They work a fixed number of hours (less than 38 hours per week). Is a minimum amount an employer must pay their employee for the work performed. This amount will vary depending on the Award that the employee may be covered under, the employee’s age, industry of employment, qualifications etc. Full time employees are usually employed on a permanent basis or on a fixed term contract.

Welcome to Payroll Dictionary

SSN stands for Social Security number, or the code assigned by the Social Security Administration to every American’s social security account. Applicants cannot gain employment without providing this number. The acronym SSA can refer to either the Social Security Act or the Social Security Administration.

Section 125 plan

With respect to disadvantages, when companies outsource their payroll system, they must rely on individuals outside the business for accurate accounting. In the event of an error, the company’s on-site personnel must deal with upset employees. Companies might also face tax penalties for errors made by the payroll service. Most businesses qualify for a 5.4% FUTA credit reduction after paying their state unemployment taxes, bringing the FUTA tax rate down to 0.6%. 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.

Net pay is the final amount you pay your employees for their work, after all deductions have been made. Regardless of your level of involvement in payroll, there are certain payroll terms that you should know. Click through for a roundup of words that are commonly used in the payroll industry. Either way, your organisation’s payroll performance requires everyone on the team to have a working knowledge of UK payroll terms. Supervisors approve employee timesheets to ensure their accuracy. Throw some of these terms around the next time you talk to your accountant about payroll.

Published On: July 11th, 2023 / Categories: Bookkeeping /