Glossary of Payroll Terms

Earnings

The amount owed to an employee based on salary, hours worked, or other calculation routines, plus other types of compensation and holiday, vacation, and bonus pay.

EDI

Electronic Data Interchange. Method of electronically transmitting payments, invoices, etc.

EFT

Electronic Funds Transfer. Generally used in the contact of the electronic remittance of federal/state taxes. Also select wire transfers of money (benefits, certain vendors, etc.) made by the Treasurer.

Employee

A worker performing services in exchange for compensation who meets the common law test. See also "Independent Contractor." Under Common Law, anyone who performs services for an individual or company (employer), where the employer can control what will be done and how it will be done. This applies even when you give the employee freedom of action.

Employee Deductions

Income that is withheld from an employee's paycheck for benefits, and other authorized reasons.

Employer Identification Number (EIN)

A nine-digit number issued by the IRS and used to identify the tax accounts of employers. The digits are arranged as follows: 00-0000000. Also known as federal ID number.

Employee, Statutory

Someone who works for you and is not an employee under the Common Law; for example, commission drivers, full-time insurance salespeople, or traveling salespeople. The company does not withhold Federal income tax from the pay of statutory employees.

Employee Type

The employee type designates whether the employee is salaried, hourly, or exception hourly.

Earned Income Credit

A tax credit that is available to low-income employees; it may be taken when the employee files his or her individual tax return.

Exempt Benefits

Benefits that are not subject to FIT, FITW, FICA, or FUTA.

Exempt Employee

Classification of employee whose job title and description does not allow for cash paid overtime or comp time. "Exempt" employees are paid an annualized rate for performing the whole job, not for actual hours worked; these employees do not track, earn or receive overtime compensation.

Exemption

Usually known as a personal withholding allowance, and not to be confused with number of dependents. You can usually claim one of the following: yourself and a spouse (0, 1, or 2), blind or over 65.

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