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.
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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