Pay Period The period covered by a salary payment.
Payroll The total amount earned by all employees for a pay period. –The payroll is reduced by state and federal taxes and other deductions, such as health insurance, to determine the amount paid to all employees.
Payroll Time Cards Time cards are used as the basic source of information to prepare a payroll.
Calculating Hours Worked Four steps are followed to calculate employee hours worked: 1.Calculate the number of regular hours for each day and enter the amounts in the Hours Reg column. 2.Calculate the number of overtime hours for each day and enter the amounts in the Hours OT column. 3.Add the hours worked in the Hours Reg and OT columns. Enter the totals in the spaces provided at the bottom of the time card. 4.Add the Hours column to calculate the total hours.
Total Earnings The total pay due for a pay period before deductions. –Sometimes referred to as gross pay or gross earnings.
Calculating Employee Total Earnings Four steps to calculate total earnings: 1.Enter the rate for regular time. 2.Enter the rate for overtime. 3.Multiply overtime hours and overtime rate. 4.Add the Amount column to calculate the total earnings.
Payroll Taxes Taxes based on the payroll of a business. –Businesses are required by law to withhold certain payroll taxes from employee salaries. –All payroll taxes are based on employee total earnings. –Payroll taxes represent a liability until payment is made.
Employee Income Tax A business must withhold federal income taxes. Federal Taxes must be forwarded periodically to the federal government. W-4, Employee’s Withholding Allowance Certificate, determines the amount of income tax to be withheld. Employers are required to have on file a current W-4 for all employees.
Employee’s Withholding Allowance Certificate W-4 Employees identify if they are married or single. (A married employee will have less income tax withheld than a single employee) An exemption from withholding is available for certain low-income and part-time employees.
Withholding Allowance A deduction from total earnings for each person legally supported by a taxpayer. –The larger the number of the withholding allowances claimed, the smaller the income tax withheld from employee salaries.
FICA Tax- Federal Insurance Contributions Act A federal tax paid by employees and employers for old- age, survivors, disability, and hospitalization insurance. Based on the total earnings of the employees.
Federal Unemployment Tax A federal tax used for state and federal administrative expenses of the unemployment program. Paid entirely by employers.
State Unemployment Tax A state tax used to pay benefits to unemployed workers. Usually paid by the employer.
Retention of Records Employers are required to retain all payroll records showing payment and deductions. Records pertaining to social security tax and deductions must be retained for four years.