Your payroll cheat sheet

Payroll jargon can get a bit confusing thanks to the myriad of similar sounding terms. Below is a cheat sheet to help differentiate those terms.

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These are your payroll CliffsNotes (or Sparknotes, depending on which website you prefer).

Manual Check Vs. Live Check

  • Manual Check: A check is created and written by a client outside of regular payroll processing.
  • Live Check: Generally an employee’s paycheck, included in payroll packages sent to our clients (as opposed to direct deposit).

Deductions vs. Exemptions

  • Deductions: An amount subtracted from a paycheck (like taxes, garnishments, medical premiums).
  • Exemptions: A tax withholding allowance that is elected by an employee on Form W-4.

Pre-Tax vs. Non-Taxable

  • Pre-tax: Deductions from pay before taxes are calculated (like medical premiums).
  • Non-taxable: Additions to an employee’s pay (like expense account reimbursements).

Net Pay vs. Gross Pay

  • Net Pay: Amount paid after all deductions (including taxes) are subtracted.
  • Gross pay: Amount of pay prior to all deductions.

Semi-Monthly Pay Frequency vs. Semi Weekly Tax Depositor

  • Semi-Monthly Pay Frequency: How often employees are paid.
  • Semi-Weekly Tax Depositor: The term ‘semi-weekly’ can be misleading. An employer is required to make payroll tax deposits either monthly or ‘semi-weekly’ (after each and every payroll). The deposit date is based on the payroll check date.

Voided Check vs. Stop Payment

  • Voided Check: A check rendered null and void. A check may be physically altered to prevent cashing or depositing (like writing void on a check).
  • Stop Payment: A notification to the bank to prevent a specific check from being cashed. This usually requires a fee.

Semi-Monthly vs. Bi- Weekly Pay Cycles

  • Semi-Monthly Pay Cycle: Pay twice a month (like the 1st and the 15th). Usually involves 24 pay periods.
  • Bi- Weekly Pay Cycle: Pay every other week (like every other Friday). Usually involves 26 pay periods.

Date of Hire vs. Length of Service

  • Date of Hire: The employee’s first day working with the company.
  • Length of Service: Time worked by the employee with adjustment of significant leaves of absences.

Pay Period vs. Tax Period

  • Pay Period: The legally specified length of time used to calculate employee hours worked.
  • Tax Period: Period of time to determine an employer’s tax liability.

 

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