Glossary of Payroll Terms

Actual Deferred Percentage (ADP)

The percentage of wages deferred by employees under a salary reduction arrangement (e.g.401(k) plan). The ADP is reviewed to see if a salary reduction arrangement meets the IRS qualification requirements.

Accruals (Leave)

Any hours that employees accumulate for use at another time in the form of earned vacation time or sick leave, for example.

Advanced Earned Income Credit

Eligible employees can receive the earned income tax credit (EIC) when they file their tax return. Or, by completing Form W-5, Earned Income Credit Advance Payment Certificate, they can get a portion of the credit in advance with their pay. Form W-5 expires on December 31 of each year. A new form must be filed each year in order to continue receiving advance EIC in the next year.

After-Tax Deduction

A deduction from pay that does not reduce the taxable wages (also called a "post-tax contribution.")

Annualized Salary

The amount an employee would receive if he or she were working full time for a full year. All hourly rates of pay for salaried employees are based on an annualized amount in the Payroll System, regardless of FTE.


Amount of salary reduction to purchase a tax-sheltered annuity (TSA). This is a way to save additional money for retirement. Increasing your annuity will decrease the amount of taxes withheld.


An involuntary transfer of wages to satisfy a debt.

Automated Clearing House (ACH)

Federal Reserve Bank or private financial institution acting on behalf of an association operating a facility that serves as a clearinghouse for direct deposit.

Awards and Prizes

Cash or non-cash awards to employees. Taxation depends on the value of the award or prize and other qualifications.