Applies to employers who must withhold local taxes from employees’ wages and/or pay their own share of local employment taxes. The law requires that overtime hours over 40 hours per week be paid at one-and-a-half times the regular hourly rate. Some employees are exempt from the FLSA and the Act doesn't apply to independent contractors or volunteers because they're not considered employees.

1. An employer-paid federal payroll tax which is used to help fund the unemployment insurance system.
2. It is a safe way to transfer money between banks and credit unions and reduces the needs for paper and checks.
3. An acronym for Automated Clearing House, ACH refers to an electronic network dedicated to credit and debit transfers.
4. Form 1099NEC refers to a set of tax forms used to report income outside of traditional employee wages.
5. A few states, including New Jersey and Pennsylvania, require employees to pay SUTA via payroll deduction.

Exempt vs. Non-Exempt Employees

Click on any of the letters below to jump to words that start with that letter. For more help with running your business, check out our glossaries for HR and benefits terms, too. Under this law, employers are required to notify employees at least 60 days before a plant closing or other type of mass layoff.

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.

Common Payroll Terms To Know

These employees are paid a salary (not an hourly rate) and must perform executive, administrative or professional duties. They are not paid overtime rates for hours exceeding 40 in a week. A payroll tax cut would mean that fewer Social Security and Medicare taxes are withheld and taken out of paychecks. The idea is that workers and businesses would take home a little extra with each paycheck and that would encourage them to spend more and stimulate the economy. Investopedia conducted a review of payroll management and accounting software for small businesses and evaluated their cost, ease of use, features, integrations, and scalability.

Small Business Payroll Glossary

These types of payments are taxable, so you must separate them out when you're doing payroll accounting and include them in the employee's taxable wages for the year. Overtime is the additional amounts paid to hourly employees who work over 40 hours in a week, who work on weekends, or other additional amounts. Overtime must be paid at one-and-a-half times the person's hourly pay rate for employees who work more than 40 hours in a workweek. Courts sometimes issue garnishment orders for debts like student loans, small claims judgments, child support, or other amounts the employee owes. You must comply with the order if you receive a garnishment notice ordering your business to garnish wages.

This amount is then used to determine the level of pay subject to garnishment or child support withholding. Processing payroll is a complex and time-consuming endeavor that requires adherence underlying profit to strict federal and state rules and regulations. Small businesses often handle their payrolls using cloud-based software. Other companies choose to outsource their payroll functions or invest in an integrated ERP system that manages the overall accounting and payroll.

Employee’s Withholding Allowance Certificate (W-

This is designed to tide recently terminated employees over until they are able to obtain employment again. The individual retirement account (IRA) offers employees greater control over their retirement savings. With this retirement plan, employees can deposit funds and enjoy access to tax advantages. The IRS defines an independent contractor as any worker who is self-employed, as opposed to traditionally employed by a company. In terms of payroll, independent contractors are significant in that they do not require money to be withheld for Social Security or Medicare. In payroll processing, an accrual occurs any time there is a difference between the pay cycle allocation and the actual expenses paid.