Posted on March 8, 2013

As a business executive, you may find yourself talking to members of your Human Resources department on a regular basis. Or, if you’re a fairly new HR employee, you may be in need of a refresher course on the terminology used in the field.

If so, it’s important to make sure you’re familiar with the terms most often used in the world of payroll processing. Here are several to get you started:

Accrual
In payroll processing, an accrual occurs any time there is a difference between the pay cycle allocation and the actual expenses paid.

ACH
An acronym for Automated Clearing House, ACH refers to an electronic network dedicated to credit and debit transfers. These transfers often include payroll direct deposits.

Annualized Salary
For employees working on a part-time or hourly basis, the annualized salary is a calculation of the amount any given employee can expect to earn in a single year. Essentially, one week's earnings are multiplied by the number of weeks worked in a year, or often, one month's salary is multiplied by 12 to determine the annualized salary.

Contractor
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.

CPP
CPP stands for Certified Payroll Professional. This professional designation is provided for those who successfully complete the certified payroll professional examination.

Deduction
Any time a predetermined amount of money is taken from an employee's check at the end of the pay period, it is referred to as a deduction. Most often, deductions are made for functions such as health benefits and union dues.

Disposable Earnings
Disposable earnings refer to any wages that are left over after all government taxes and defined deductions have been taken out of the paycheck. This amount is then used to determine the level of pay subject to garnishment or child support withholding.

FLSA
Passed in 1938, the Fair Labor Standards Act (FLSA) instituted a number of regulations on working conditions designed to keep employees safe and fairly paid. This act mandates that all non-exempt employees working overtime (over 40 hours in a week) be paid time and a half. The FLSA also established the minimum wage and provided several mandates related to child labor. The individual regulations in FLSA may, under certain circumstances, be superseded by state and local laws.

FMLA
First passed in 1993, the Family Medical Leave Act (FMLA) allows employees to take leave from work in order to care for themselves or family members. When these employees return to work, their prior salary and health benefits must be fully restored.

FICA
The Federal Insurance Contributions Act (FICA) mandates a payroll tax to be imposed on both employees and employers. This tax is then used to fund such programs as Social Security and Medicare. The amount an employee pays in payroll taxes over the course of his or her career may be indirectly related to the level of benefits for which he or she is eligible.

While these are useful terms to know, the ins and outs of payroll processing definitely require a more thorough knowledge. Trust your payroll to the experts at Paycor. To learn more, contact us.

Check back next week for more helpful payroll terms and acronyms!