Understanding payroll terms
This topic contains a quick reference for some commonly-used payroll
terms. As terminology can differ between state and federal governments,
Ajera uses the most common terms.
Gross pay
An employee's total pay. Also called earnings.
Taxable earnings
Earnings subject to Federal, state, or any local taxes.
Taxable earnings = Total pay - (Exempt pays + Pre-tax deductions)
Exempt pay
Pay that does not meet criteria for taxable earnings.
You set up exempt pays on the Company > Payroll > Pays window
by selecting the applicable check boxes in the Employee Tax Exempt and
Employer Tax Exempt area. For example, if you want to exclude sick pay
from state unemployment tax, you select the State
Unemployment Employer Tax Exempt check box.
Example: $1,000 (gross) - $100 (Exempt Pay) = $900 (Taxable and Subject
- to)
Pre-tax deductions
Deductions made from gross pay before deducting taxes. You set up pre-tax
deductions on the Company > Payroll > Deductions window by selecting
the applicable check boxes in the Employee Tax Exempt and Employer Tax
Exempt area.
Example: $1,000 (gross) - $100 (401(k) deduction) = $900 (Taxable and Subject
- to).
The taxable amount is specific to each tax. Many states refer to taxable
pay as gross pay.
Subject-to earnings
Taxable earnings up to the wage limit, if any. You set up subject-to
earnings on the Company > Payroll > Taxes window. The subject-to
amount is specific to each tax.
Example:
Employee's salary is $5,000 per month.
Federal Unemployment wage limit: $7,000
First paycheck:
- Federal Unemployment Taxable = $5,000
- Federal Unemployment Subject-to = $5,000
Second paycheck:
- Federal Unemployment Taxable = $5,000
- Federal Unemployment Subject-to = $2,000
See also
About payroll
About processing
payroll in-house
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