Glossary

A 1099 contractor is a self-employed worker hired to provide services to a business. They are not on payroll and typically receive a 1099-NEC form to report income for tax purposes.

Form 1099-NEC reports non-employee compensation paid to independent contractors. Businesses must file it with the IRS and send a copy to each contractor paid $600 or more in a calendar year.

An audit trail is a recorded history of all changes, transactions or updates made within a system. It helps organizations maintain accuracy, accountability and compliance in financial and HR records.

Automated Clearing House (ACH) is a network that moves money electronically between bank accounts. It is commonly used for payroll direct deposits and recurring vendor payments.

A bonus is a one-time payment given to an employee as a reward for performance, milestones or company results. It is separate from base pay and not tied to regular compensation.

Commission is pay based on sales or specific outcomes, often used in roles tied to revenue. It serves as an incentive and varies based on individual or team performance.

A cost center is a department or function where specific expenses are tracked for budgeting and reporting. It helps organizations assign and manage costs by area or team.

Understand how deductions reduce employee pay through taxes, benefits and other withholdings. Learn how required and voluntary amounts are applied and how they impact payroll accuracy and compliance.

Direct deposit is an electronic payment method that transfers funds directly into an employee’s bank account. It is commonly used by employers for payroll and reimbursements.

Employee Self-Service (ESS) is a feature in HR systems that allows employees to view and manage their personal information. It often includes access to pay stubs, benefits and time off.

Employer taxes are payroll taxes businesses pay beyond employee wages. They include federal and state employment obligations, such as unemployment taxes and the employer portion of payroll taxes.

An exempt employee is paid a salary and not eligible for overtime under wage laws. Status depends on duties performed and meeting minimum salary and classification requirements.

Federal income tax is a mandatory tax withheld from employee wages by employers and paid to the IRS. The amount depends on earnings, filing status and withholding elections.

FICA is a federal payroll tax that funds Social Security and Medicare benefits. Employers and employees each contribute a set percentage of wages based on IRS requirements.

FUTA requires employers to pay a federal tax used to fund unemployment benefits. It applies to the first portion of each employee’s annual wages.

Form 941 is the IRS form employers use to report income taxes, Social Security and Medicare taxes withheld from employee wages. It is filed quarterly and includes employer tax contributions.

A garnishment is a legal order requiring an employer to withhold part of an employee’s wages to pay a debt. This may include unpaid taxes, child support or other obligations.

A general ledger (GL) is the central recordkeeping system for a company’s financial data. It organizes transactions by account to support reporting, reconciliation and audits.

Gross pay is the total amount an employee earns before any deductions are withheld. It includes base wages, overtime, commissions, bonuses and any other taxable compensation.

Holiday pay refers to compensation provided to employees for recognized holidays, whether or not they work that day. It may vary based on company policy or employee classification.

HRIS integration connects your human resource information system with other business platforms. It allows data to flow between systems to improve accuracy, efficiency and reporting.

Imputed income is the taxable value of certain employer-provided benefits that are not paid in cash but must be added to an employee’s wages for tax reporting and withholding purposes.

Medicare tax is a federal payroll tax that funds Medicare benefits for eligible individuals. It is withheld from an employee’s gross pay, and employers are required to match the contribution.

Net pay, also called take-home pay, is the amount an employee receives after taxes and deductions are subtracted from gross wages. It is the final amount deposited or paid.

A non-exempt employee is eligible for overtime pay under the Fair Labor Standards Act. These workers are typically paid hourly and must receive overtime for hours worked beyond 40 in a week.

This federal law includes updates to payroll tax treatment, overtime and reporting requirements for employers. It introduces new compliance rules that impact wage tracking and year-end reporting.

Overtime pay is additional compensation owed to nonexempt employees who work more than 40 hours in a workweek. It is typically calculated at one and one-half times the regular pay rate.

Paid time off (PTO) is a benefit that allows employees to take time away from work with pay. It typically includes vacation, sick leave and personal days under a single policy.

A pay grade is a structured level of compensation assigned to a job role based on responsibilities, experience or skills. It helps maintain internal equity across job positions.

A pay period is the recurring schedule an employer uses to process payroll and issue employee wages. It defines how often employees are paid, such as weekly, biweekly or monthly.

Pay rate is the amount an employee earns based on time worked or output produced. It applies to hourly, salaried or contract roles and affects gross pay, overtime and wage compliance calculations.

A pay stub is a document that outlines the details of an employee's earnings and deductions for a specific pay period. It typically includes gross pay, net pay, taxes and benefits.

A pay stub portal is an online platform where employees can securely view, download and manage their paycheck stubs. It supports access to current and historical payroll information.

Payroll Integration connects payroll systems with HR software so employee pay, taxes and deductions stay aligned. It reduces reentry and supports accurate payroll processing across HR teams.

A payroll register is a detailed report that lists employee pay information for a specific period. It includes wages, taxes, deductions and net pay used for reporting and audits.

Payroll software is a digital tool used to calculate employee wages, withhold taxes and manage direct deposits. It helps HR teams process payroll accurately and stay compliant.

PTO accrual is the method used to calculate how paid time off accumulates over time. It’s typically based on hours worked, length of service or a set monthly or annual schedule.

Retroactive pay is compensation owed to an employee for work completed in a previous pay period. It is used to correct underpayments or apply new pay rates retroactively.

Shift differential refers to extra pay given to employees who work less desirable hours, such as evenings or nights. It compensates for working outside standard daytime shifts.

Social Security tax is a federal payroll tax that funds retirement and disability benefits. Employers and employees each contribute a set percentage of eligible wages up to an annual limit.

SUTA is a state-level payroll tax paid by employers to fund unemployment insurance programs. Tax rates and wage bases vary by state and employer history.

Tax codes are used in payroll to determine how much tax to withhold from an employee’s wages. They reflect filing status, allowances and other factors that affect withholding calculations.

Tax withholding is the required amount an employer deducts from an employee’s wages to cover federal, state or local taxes. The amount depends on income and withholding elections.

A time clock records when employees start and end work shifts, capturing hours worked for payroll and compliance. It supports accurate time tracking across hourly, salaried and remote roles.

A timesheet is a record of the hours an employee has worked during a specific period. It is used to calculate pay, track attendance and support accurate payroll processing.

User permissions define what actions a person can take within a system based on their role. They help control access to sensitive data and maintain compliance across HR functions.

A W-2 employee is a worker whose employer manages tax withholdings and benefits. Their wages are reported on Form W-2 and include income tax, Social Security and Medicare contributions.

Form W-2 reports wages paid to employees and all federal, state and other taxes withheld throughout the year. Employers must file it with the IRS and give a copy to each employee by January 31.