Employee Compensation and Payroll Basics

Chapter 12 Term Wage FYI – exemptions to federal wage laws Salary Commission Total Earnings FYI – another names for Total Earnings Pay Period FYI – 4 pay periods Payroll Payroll Clerk Time Clock FYI – Fair Labor Standards Act requirements Payroll Taxes Withholding Allowance Definition The amount paid to an employee for every hour worked Allows employers to exempt owners and managers from hourly payment A fixed annual sum of money divided among equal pay periods a method of paying an employee based on the amount of sales the employee generates The total amount paid by a business for an employees work, earned by a wage, salary, or commission Gross pay, Gross wages, Gross earnings The number of days or weeks covered by an employees paycheck Weekly, Biweekly, semimonthly, monthly The total amount earned by all employees for a pay period The accounting staff position that compiles and computes payroll data and then prepares, journalizes, and posts payroll transactions a device used to record the dates and times of every employees arrivals and departures requires that businesses pay employees at least 1.5 times their normal hourly rate for hours worked in excess of 40 hours a week Taxes based on the payroll of a business A deduction from total earnings for each person legally supported by a taxpayer, including the employee FYI – W-4 two main piece of employees marital status and number of allowances info 1.last year had a right to a refund for all federal income tax withheld because had no FYI – Withholding tax liability 2.this year expect a refund for all federal income tax withheld because exemptions have no tax liability Payroll Deductions FYI – requiring Social Security number FYI – IRS administers Social Security Tax Medicare Tax Accumulated earnings Tax Base FYI – current tax rate & tax base amount Any amount withheld from an employees gross earnings law requires that each employee must have a social security number.law ensures that most infants one year old will have a social security number the tax laws A federal tax paid for old-age, survivors, and disability insurance A federal tax paid for hospital insurance The total gross earnings year to date for an employee The maximum amount of earnings on which a tax is calculated Qualified Retirement Plan A retirement savings plan approved by the IRS that provides individuals with a tax benefit a qualified retirement plan sponsored by an employer a qualified retirement plan that provides most individuals with a deferred federal income tax benefit 401(k) Individual Retirement Account (IRA) Roth Individual Retirement Account (Roth IRA) Payroll Register Net Pay Employee Earnings Record 403(b) Voucher Check 6.2% of earnings up to a maximum of $106,800.00 in each year a qualified retirement plan that allows tax-free withdrawals from the account summarizes the earnings, deductions and net pay for all employees for one day period The total earnings paid to an employee after payroll taxes and other deductions A business form used to record details of an employees earnings and deductions allows pretax contributions for government employees and employees of taxexempt organizations has a detachable check stub, or voucher, that contains detailed information about the cash payment EFT Direct Deposit FYI – reasons for separate payroll checking account A computerized cash payments system that transfers funds without the use of checks, currency, or other paper documents is called Electronic Funds Transfer The payment of an employees net pay using EFT provides internal control and helps prevent fraud