Glossary of Payroll Terms

Deduction

Any amount taken from an employee's pay check each pay period. Deductions may include health or medical benefits, union dues, and so on.

Deferred Compensation

The postponement of a wage payment, generally used to describe the portion of wages that employees set aside for retirement, usually on a pretax basis.

Direct Deposit

The electronic transfer of payments to any bank in the U.S. which is a member of an automated clearing house.

Disposable Earnings

The part of the employee's check remaining after deductions required by law (taxes); it is used to determine the amount of an employee's pay that is subject to a garnishment, attachment, or child support withholding.

Duties Test

The "duties test" is one way the FLSA distinguishes exempt from non-exempt employees. (See Salary Basis Test.) Some high-level, "white collar" employees are FLSA exempt, if their duties are "executive," "administrative," or "professional" (and if they are paid "on a salary basis"). Executives are high-level employees whose primary job duties are to make discretionary, organization-wide policy decisions. Administrators are high-level employees whose primary job duties are to provide organization-wide support services involving discretion and policy-making. Professionals are high-level employees who are doctors, lawyers, or in other highly educated occupations. Job titles are not determinative. Actual job duties are. Most employees who are engaged in the "production" aspects of their businesses or agencies (i.e., who are involved in making or providing goods or services) are not exempt executives, administrators, or professionals. For example, operational ("street level") police officers are often nonexempt.

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