Payroll Glossary

Payroll Glossary

Payroll Glossary

This glossary covers essential payroll terminology to help you navigate payroll processes and documentation. Some terms are specific to the BerniePortal platform, while others are standard industry definitions you'll encounter across payroll systems.

Core Payroll Terminology
  1. Gross Pay: The total amount an employee earns before taxes or any deductions are taken out. This includes regular wages, bonuses, and other compensation.
  2. Net Pay: The amount an employee takes home after all taxes and deductions have been subtracted from gross pay. Also called take-home pay.
  3. Pay Frequency: How often employees are paid. Common pay frequencies include: Weekly (every week), Biweekly (every two weeks), Semimonthly (twice a month), and Monthly (once a month)
  4. Pay Stub: A document given to employees each payday that shows their earnings, deductions, and net pay. It breaks down things like hours worked, tax withholdings, benefits, and year-to-date totals.
  5. Pay Date: The date employees receive their funds.

Employee Management and Information
  1. Exempt Employee: An employee who is not entitled to overtime pay under the Fair Labor Standards Act (FLSA). These employees are usually salaried and meet certain job duty requirements (often administrative, executive, or professional roles).
  2. Non-Exempt Employee: An employee who is entitled to overtime pay (usually time and a half) for any hours worked over 40 in a workweek. These employees can be paid hourly or salary, but their role must meet FLSA guidelines.
  3. Payroll Subgroup: A way to organize employees into separate groups within your payroll system so you can pay them differently based on their specific needs. This is useful when your company has different FEINs, various pay schedules, different levels of admin access, or other requirements that need to be handled separately from your main payroll process.
  4. Masquerade: Ability to “log in” as if you are an employee, employer, or broker.

Employee Documentation
  1. W-4: A federal tax withholding form completed by an employee to tell their employer how much federal income tax should be withheld from their paycheck. The information provided—such as filing status, dependents, additional income, or extra withholding requests—helps determine the employee’s federal tax withholding amount for payroll processing.
  2. W-9: A tax form used to collect a contractor’s legal name, address, and Taxpayer Identification Number (TIN) for tax reporting purposes. Employers typically request a completed W-9 before issuing payments to independent contractors. The information provided on the form is commonly used to prepare a 1099 form at year-end.
  3. State Withholding: A state-specific tax form completed by an employee to indicate how much state income tax should be withheld from their paychecks. Similar to the federal W-4 form, the information provided helps the employer calculate the appropriate amount of state tax withholding based on the employee’s filing status, allowances, exemptions, and state requirements. Not all states require a separate withholding form, as some states do not have state income tax.
  4. Direct Deposit: A form completed by an employee to authorize electronic deposit of their wages into a bank account. The form typically includes the employee’s bank name, account type, routing number, and account number, allowing payroll to securely transfer funds directly to the designated account on payday.

Processing Payroll
  1. Payroll Edit Screen: The screen where Employers enter or make changes to payroll details for a specific pay period—like hours worked, bonuses, deductions, or other earnings.
  2. Payroll Summary Screen: The screen Employers see after clicking Save and Review on the Payroll Edit Screen. It summarizes payroll data, including taxes, garnishments, deductions, and employer costs. There will be an option to review the pre-process register, which is essentially your last stop before you submit payroll.
  3. Earning: Any type of compensation or income that an employee receives from their employer during a pay period. This includes regular wages or salary, but also encompasses additional forms of compensation such as overtime pay, bonuses, PTO, commissions, etc.
  4. Overtime: Extra pay earned when a non-exempt employee works more than 40 hours in a workweek (or 8 hours in a workday, depending on the state). The Federal standard overtime rate is 1.5 times the employee's regular hourly rate.
  5. Deduction: An amount taken out of an employee's paycheck for things like taxes, benefits (e.g., health insurance), or retirement contributions. Pre-tax deductions lower taxable income (e.g., 401(k), HSA) Post-tax deductions are taken after taxes are calculated (e.g., Roth 401(k), garnishments)
  6. Garnishment: A court-ordered deduction taken from an employee's paycheck to pay off a debt, such as child support, unpaid taxes, or student loans. Employers are legally required to process these once notified.

Taxes and Withholding
  1. Withholding: The portion of an employee's paycheck that an employer sends directly to the government for taxes—like federal income tax, Social Security, and Medicare.
  2. FITW: The portion of an employee’s wages withheld by the employer for federal income taxes and remitted to the IRS on the employee’s behalf. The amount withheld is based on the employee’s Form W-4 elections, taxable wages, and IRS withholding tables.
  3. FICA: Short for the Federal Insurance Contributions Act. It includes- Social Security tax Medicare tax - These taxes are withheld from employees' paychecks and matched by the employer.
  4. SITW: The portion of an employee’s wages withheld by the employer for state income taxes and remitted to the applicable state tax agency on the employee’s behalf. The amount withheld is based on the employee’s state withholding elections, taxable wages, and the tax requirements of the state in which the employee works or resides.
  5. FUTA: A federal tax that employers pay to help fund unemployment benefits. Only employers pay this tax (not employees). It's used to support state unemployment programs. Reported annually on Form 94
  6. SUTA/SUI: A state employer-paid tax used to fund unemployment benefits for workers who become unemployed through no fault of their own. SUTA tax rates and wage bases vary by state and may be influenced by the employer’s industry, experience rating, and history of unemployment claims.

Compliance and Reporting
  1. PreProcess Register: A payroll preview report generated before payroll is submitted and processed. The report allows employers to review employee earnings, deductions, taxes, direct deposit amounts, and overall payroll totals for accuracy prior to submitting and finalizing the payroll run.
  2. Payroll Ledger: A detailed payroll accounting report that records payroll-related financial activity for a pay period, including employee earnings, taxes, deductions, employer contributions, and net pay amounts. Payroll ledgers are commonly used for accounting reconciliation, journal entries, auditing, and general ledger reporting.
  3. Year to Date: A cumulative total that reflects amounts accumulated from the beginning of the calendar or fiscal year through the current date. In payroll, YTD figures commonly track employee earnings, taxes withheld, deductions, and employer contributions across all payrolls processed during the year.
  4. Quarterly Filing: A required tax report submitted by an employer to federal, state, or local agencies each quarter to report employee wages, payroll taxes withheld, unemployment taxes, and other payroll-related information. Common quarterly filings include federal Form 941 and state unemployment or withholding tax reports.
  5. W2: An annual wage and tax statement provided by an employer to employees and filed with the IRS. The form summarizes an employee’s total earnings, taxes withheld, and certain benefits or deductions for the calendar year, and is used by employees to complete their personal income tax returns.
  6. 1099: An IRS tax form used to report income paid to individuals who are not classified as employees, such as independent contractors, freelancers, and vendors. The most common version, the 1099-NEC, reports nonemployee compensation. Businesses issue 1099 forms annually to both the recipient and the IRS to document taxable payments made during the year.

Adjustments and Corrections
  1. One-Off: Off-cycle payroll runs. Examples of this would be commission runs, bonus pay, corrections, or final pay (for certain states).
  2. Void: A process used to cancel a payroll payment that was submitted or issued in error. Voiding removes the payment from the payroll history, allowing the employer to correct and resubmit the payment if needed.
  3. Reversal: A payroll correction process used to cancel or pull back a payment that has already been processed or deposited. A reversal removes the funds from the employee and updates payroll records to correct the original payment, typically when a payroll was issued in error or needs to be fully retracted and reprocessed.
  4. Manual Payment: A payroll payment that is entered and processed outside of the standard automated payroll calculation. Manual payments are typically used for off-cycle payments, corrections, bonuses, or special adjustments, and may require the employer to manually enter earnings, taxes, and deductions so they are properly recorded in payroll history and reporting.

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