Glossary of Payroll Terms

Salaried Employee

An employee who is paid a fixed salary for a certain time period. Salaried employees are usually not subject to overtime pay and a daily time card is not filled out.

Salaried Non-Exempt

An employee who is paid on a salary basis rather than an hourly basis. However, overtime pay must be paid to the employee based upon responsibilities of the position.

Salary Basis Test

The "salary basis test" is one way the FLSA distinguishes exempt from nonexempt employees. (See also Duties Test.) The salary basis test has been used to obtain overtime compensation for employees who would might be considered exempt because of their "white collar" job duties. To be exempt, an employee must be paid "on a salary basis." This means, (a) s/he must receive a guaranteed minimum amount in every paycheck no matter how many hours were worked, and (b) the employee's pay may not be "subject to" reduction based on quality or quantity of work performed. Employees who are subject to suspensions without pay or layoffs are not paid on a salary basis, and are therefore nonexempt, no matter what their job duties are. For example, police officers who are subject to suspension without pay for disciplinary violations of department rules and regulations are usually nonexempt, regardless of rank.

Shift Differential

The extra pay an employee receives for working on a certain schedule such as evenings.

Sick Leave Pay

Pay given an employee for a time period not worked due to illness or injury.

Social Security

A general term describing taxes paid for a variety of old age and retirement benefits. There are two types of social security taxes: OASDI (Old Age, Survivor, & Disability Insurance) and Medicare (HI - hospitalization insurance). In 1991 the IRS required employers to report the two taxes separately. The 1994 percentage for FICA is 6.2% and for MCARE it is 1.45%. The total deduction for the two taxes is 7.65%. Employers must usually match this deduction.

Social Security Administration

A federal agency responsible for the administration of the Social Security benefits and annual wage reporting programs.

Social Security Number (SSN)

The unique number assigned by the Social Security Administration to each individual's Social Security account.

Standard Hours

Standard hours designate the number of hours defined for a normal workweek. Typically, a normal workweek consists of 40 hours.

State Tax Withholding

Most states require employers to make deductions from employee's paychecks for state income taxes. Each state has its own tax rates and procedures, and there is little or no consistency from one state to another. Several states have no state income tax at all.

Straight-Time Pay

The regular rate of pay for all non-overtime hours of work.


State Unemployment Insurance. All states require employers to contribute to unemployment insurance programs. Several states also allow an employee deduction as well. Each state sets its own rate and taxable wage limit.

Supplemental Wages

Specific wage payments from which the employer may withhold a flat 28% for federal income tax.


State Unemployment Insurance. An amount which must be paid into a state government unemployment fund by an employer for each employee. The payment is taken as a certain percentage of an employee's earnings, up to a certain ceiling. An employer's SUTA contributions can also be credited against his FUTA tax.

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