Payroll glossary
Plain-English definitions for the terms that show up on paystubs, in HR documents, and in conversations with payroll providers.
1
- 1099-NEC
- The IRS form used to report payments to independent contractors. No taxes withheld; contractor pays self-employment tax.
A
- Accrual (PTO)
- Paid time off earned gradually as hours are worked — e.g., 1 hour of PTO per 30 hours worked, capped at 80 hours/year.
B
- Base rate
- The contractual hourly wage before any premiums, bonuses, or shift differentials.
- Bi-weekly pay
- A pay schedule of every two weeks (26 paychecks per year). Different from semi-monthly (24 paychecks).
D
- Double-time (DT)
- Pay at 2× the regular rate. Required by California for hours over 12/day and over 8 on the 7th consecutive day; not required by federal FLSA.
E
- Exempt employee
- A worker not covered by FLSA overtime requirements because they meet salary-basis, salary-threshold, and duties tests. No OT owed.
F
- FICA
- Federal Insurance Contributions Act tax — 6.2% for Social Security plus 1.45% for Medicare, withheld from each paycheck and matched by the employer.
- FLSA
- Fair Labor Standards Act, the 1938 federal law that sets minimum wage, overtime, recordkeeping, and child-labor rules.
- FUTA
- Federal Unemployment Tax Act — an employer-paid tax (0.6% on the first $7,000 of each employee's wages) that funds state unemployment programs.
G
- Garnishment
- Court-ordered deduction from wages for debts like child support, tax liens, or defaulted student loans.
- Gross pay
- Total earnings before any taxes, withholdings, or deductions. The number used to calculate overtime and most benefits.
H
- Holiday pay
- Premium pay (typically 1.5× or 2×) for working on a designated holiday. Not required by federal law; set by employer policy or contract.
N
- Non-exempt employee
- A worker covered by FLSA overtime — must be paid 1.5× for hours over 40/week. Most hourly employees.
- Net pay
- Take-home pay after taxes, benefit contributions, garnishments, and other deductions. Gross pay minus everything.
O
- Overtime premium
- The extra 0.5× portion of time-and-a-half pay (the part above the regular rate). For double-time the premium is 1.0×.
P
- Pay period
- The recurring window of time worked that's covered by one paycheck — weekly, bi-weekly, semi-monthly, or monthly.
- Per diem
- A flat daily allowance for travel expenses (lodging, meals, incidentals). Not wages; not subject to payroll taxes within IRS limits.
- Piece rate
- Pay per unit produced rather than per hour. Workers still must average at least minimum wage and receive OT premiums under FLSA.
R
- Regular rate
- The hourly rate used to calculate overtime. Includes non-discretionary bonuses and commissions divided by hours worked — not just the base wage.
- Retro pay
- Back pay owed when a raise, correction, or reclassification applies to a period that's already been paid.
S
- Salaried non-exempt
- A worker paid a fixed salary but still eligible for overtime because they don't meet the exempt duties test or salary threshold.
- Semi-monthly pay
- A pay schedule of twice per month (24 paychecks/year), typically on the 1st and 15th or the 15th and last day.
- Shift differential
- A premium added to the base rate for working less-desirable shifts — typically nights, weekends, or holidays. Counts as part of the regular rate for OT.
- Sick leave
- Paid time off specifically for illness. Required by law in many states and cities; accrual rates vary.
- Spread of hours (NY)
- A New York rule requiring an extra hour of pay at minimum wage when a workday spans more than 10 hours from first punch to last.
T
- Time-and-a-half
- Pay at 1.5× the regular rate. The federal FLSA overtime rate.
- Tipped employee
- A worker who customarily earns more than $30/month in tips. Federal law allows a $2.13 cash wage if tips bring total comp to minimum wage.
W
- W-2
- The annual IRS form employers send employees summarizing wages and taxes withheld. Distinguishes employees from contractors.
- W-4
- The IRS form employees fill out telling employers how much federal income tax to withhold from each paycheck.
- Workweek
- A fixed, recurring 168-hour period (7 × 24 hours). The basis for calculating weekly overtime. Doesn't have to align with the calendar week.
- Wage theft
- Employer practices that deprive workers of legally owed pay — off-the-clock work, illegal deductions, unpaid overtime, or minimum-wage violations.
Missing a term? Email us and we'll add it. See also: Overtime rules explained →