Browse our comprehensive glossary to get a deeper understanding of common HR and payroll terms, from absence management to wrongful termination.
Absence management describes the policies, processes and procedures that are employed by an organization’s HR department to track and control employee absences. This includes both scheduled absences, such as , and unplanned absences, such as sick leave. The overall objective of absence management is to minimize the impact of employee absences on the business, reduce absenteeism, and provide support to employees who are forced to take leave from work.
When referring to an employee’s leave entitlement, accruals describe the number of outstanding paid days off an employee is entitled to. This includes the number of paid vacation days the employee has earned in the respective calendar year (or applicable reference period) and any sick days that have not been taken yet. Keeping track of leave accruals is important for processing employee leave requests and calculating an employee’s final pay correctly.
Accrued payroll (or payroll accrual) refers to the amount of pay a business owes in payroll for the pay period in question. In other words, it’s the sum of a business’s payroll liabilities for the ongoing pay period. Payroll accruals include salaries and wages, commissions, bonuses, and all other elements of an employee’s compensation. The term also refers to a method in accrual accounting that tracks and records outstanding payroll costs.
After-tax deductions (or post-tax deductions) are deductions from an employee’s pay that don’t reduce his or her taxable income. Instead, post-tax deductions are taken out of the employee’s wages only after all outstanding payroll taxes have been withheld.
An Applicant Tracking System (short: ATS) is a software tool used by an organization’s Talent Acquisition function to keep track of all the candidates that have applied for a position. The aim is to accompany applicants throughout the entire application, recruiting and hiring process. The main function of an ATS is to collect and store all the relevant data (resumes, interview notes, etc.) in order to better organize the pool of applicants and increase the overall efficiency of the recruiting and hiring process.
Back pay is a term used for wages and salaries that are paid later than the date when they were initially due, i. e. payments that are issued after the pay cycle they relate to. Examples of back pay are missed payments or off-cycle payments due to payroll errors.
An employee’s base salary is the minimum amount of pay they are entitled to. Base pay can either be a fixed monthly salary or a set hourly rate. Additional pay elements such as , and pay are not included in the base salary.
Before-tax deductions are deductions that are taken out of an employee’s wages before payroll taxes are calculated and deducted. They reduce the tax burden since they decrease the amount of the employee’s taxable income.
Employee benefits are perks and incentives employers offer their employees on top of their normal compensation. Benefits can be divided into two groups: statutory and non-statutory benefits. Statutory benefits are mandatory contributions to social security and other insurance and/or training schemes. Non-statutory benefits comprise any kind of additional incentives such as gym memberships, employee discounts, and more.
If employees receive their pay on a bi-weekly basis, they receive a paycheck every other week (on a fixed day). Offering biweekly pay means having 26 pay periods in a year.
Blended work or blended working describes a work model where employees combine remote work and working from the office. The aim of allowing blended work is to enable employees to improve their performance by choosing the location where they are most productive.
A bonus is an additional payment employees receive on top of their . Bonuses can take on several different forms. There are performance-based bonuses which are paid as a reward for a particular achievement, and there are fixed bonus payments like a Christmas bonus or a 13th salary. Other types of bonuses include signing bonuses, holiday bonuses and long-term service bonuses.
Running a centralized payroll means that a business’s entire payroll management is unified in one central system. When looking at global payroll management, centralized payroll describes an organizational set-up where payroll for all geographies and employee populations is managed by a central payroll unit that usually sits in the company’s headquarters. See also .
A cloud-based payroll software is a software solution for running and managing payroll that is not hosted on the business’s internal servers. Instead, the software is provided and hosted by an external service provider. The software provider also takes care of aspects such as software updates, maintenance, and system security.
Co-employment is when employment liabilities and responsibilities for one or several employees are shared between two business entities. A co-employment relationship is usually established between a client business and a Professional Employer Organization (PEO). In this case, the PEO takes over the administrative tasks related to HR and payroll, while the client business remains in control of business operations and the daily activities of the co-employed employees.
A commission is an additional payment an employee receives for completing a certain task or as a reward for a particular achievement. The term is typically employed in the context of sales activities to refer to a premium paid to an employee for having hit (or even surpassed) his or her sales targets. The commission is usually calculated as a percentage of the sold amounts.
A compensation model outlines how a business compensates its employees for their work. Possible compensation models are commission-based pay, hourly pay, monthly salary, or a combination of fixed salary and commission.
Compensatory time off (sometimes also referred to as “time off in lieu”) is granted to employees to compensate them for additional hours worked. The advantage of offering employees compensatory time off instead of pay is that the business can avoid paying overtime rates which, in most countries, are higher than the normal hourly standard.
Regulatory compliance for businesses encompasses many different areas, ranging from payroll compliance to correct worker classification to compliance with tax and employment laws. The laws, rules, and regulations that must be observed by businesses can apply on federal, state or local level. Compliance is one of the main challenges businesses face when growing globally.
When an organization works with a contingent workforce, it hires workers on a short-term basis. This means that the workers are not hired by the business permanently, but are contracted on an on-demand basis instead. There are different types of contingent workers, including temporary employees, , and independent contractors.
The term ‘cost center’ refers to a business unit or function that primarily represents a cost for the business without directly generating revenue. Examples for major cost centers in an organization are the HR and IT departments. They are critical for running the organization, but are not directly involved in making profits.
Cost per hire is an important metric in HR and recruiting that is used to indicate the definite cost of hiring an employee. When calculating their cost per hire, businesses need to take into account all the expenses they incur in the hiring and recruiting process, from advertising costs to costs for onboarding and training to the costs of a referral bonus program.
Critical talent describes a group of people with particular skills and competencies that are in high demand, yet only available in limited supply. This usually results in a high level of competition among businesses in order to attract this talent.
Cryptocurrency payroll (short: crypto payroll) is the process of paying employees in cryptocurrencies like Bitcoin. While there are several advantages to using cryptocurrencies for paying salaries and wages (e. g. near-instant transaction processing and low fees), there are also some drawbacks (e. g. volatility of currency value and legal restrictions).
The cut-off date in payroll indicates the deadline for submitting any information relating to payroll to ensure that employees get paid correctly for the respective pay period. This includes salary changes, changes to employee personal information, and other changes relating to the data needed for payroll. Information that is submitted past the cut-off date won't be reflected in the employee’s compensation for the respective payroll run.
Decentralized payroll is an approach to payroll management that is not based on a centralized payroll system. The term is of particular relevance with regard to global payroll to describe a payroll set-up where an organization relies on local payroll teams to run payroll for different geographies. In contrast to a centralized payroll, there is no central payroll department that holds the decision-making power regarding all things payroll.
A deduction is an amount of money taken out of an employee’s wages when calculating his or her net earnings. Payroll components that fall into the category of payroll deductions include income tax, employee social security contributions, voluntary deductions (e. g. private health insurance premiums), and other deductions like wage garnishments or student loan repayments. Deductions can either be made either before (i. e. ) or after tax (i. e. ).
Deferred compensation is when payment to an employee is postponed upon his or her request. This means that the employee continues working for the employer, but receives his or her compensation at a later point. Employees typically request deferred compensation for tax reasons. The payment is then put off until the following tax year.
The acronym DE&I stands for the three values diversity, equity and inclusion. As a concept, DE&I stands for practices adopted by businesses to diversify their workforce and include people from different backgrounds, ethnicities, genders, and more. Nowadays, the concept is often extended to Diversity, Equity, Inclusion and Belonging (DEIB).
Direct compensation is the amount of money paid to an employee in direct relation to his or her services. While a company’s compensation strategy may include other pay elements, direct compensation only refers to compensation that is paid to the employee in direct exchange for hours worked and job performance (e. g. fixed monthly salary, hourly wages, pay, and ).
Direct employees are employees that are directly employed by the organization they work for. The term is used to distinguish between direct employees and workers hired through a staffing agency or another intermediary like an Employer of Record (EOR).
Disguised employment, also known as employee misclassification, describes a situation where a business classifies a worker as an independent contractor although he or she should rightfully be classified as an employee. Disguised employment allows businesses to avoid paying payroll taxes and benefits for the workers they hire.
The main characteristic of a distributed team is that the team members are spread across different locations. This can either mean that some team members work remotely while others work from the office, or that all team members work from remote locations. A team which is spread across different countries and/or continents is referred to as a globally distributed team.
Diversity hiring describes an approach to hiring and recruiting that aims at promoting diversity in an organization’s workforce. The main objective is to eliminate bias from the hiring process and assess applicants purely based on their qualifications and skills.
Earned wage access (EWA), also known as on-demand pay, is a payment model that allows employees to access a part of their wages before the actual payday. EWA enables workers to gain access to the pay they have already earned until the moment in which they request early access to their pay. The aim is to provide employees with greater financial flexibility.
Employee benefits are additional compensation elements offered to employees on top of their . There are statutory benefits and voluntary benefits. Statutory benefits include mandatory leave entitlements and employer-paid social security contributions, while voluntary benefits include perks like gym memberships or company cars.
Employee experience describes how an employee perceives his or her interactions with the company he or she works for, from recruiting to onboarding all the way to the exit interview. Creating a positive employee experience is not only important for talent acquisition but also for employee motivation, engagement and retention.
The employee lifecycle encompasses all the stages of an employee’s journey within a company. The major stages are attraction, recruitment, onboarding, development, retention, and separation. Each stage represents an important touchpoint between the employee and the organization, and ensuring that all the processes run smoothly is crucial for creating a positive employee experience.
Employee management describes all the processes within an organization that aim at enabling employees to perform well in their jobs. There are many different aspects that fall under employee management. They include fostering a positive company culture, providing employees with all the necessary tools and equipment, and keeping track of employee achievements.
The meaning of employee mobility has changed in recent years. Traditionally, it was used to refer to employees being sent on international assignments. Today, however, employee mobility has a broader meaning. Employee mobility strategies are programs designed by employers with intent to provide their workforce with a new level of flexibility and enable them to work from a self-chosen location.
Employee payroll taxes are taxes and that are taken out of the employee’s earnings during the payroll process. There is no standardized definition that outlines which deductions fall under the category of payroll taxes. In the broadest sense, however, employee payroll taxes include everything from income tax to employee-paid social security contributions.
Employee retention refers to all the processes and actions taken by a business’s HR department to decrease staff turnover. Employee retention strategies can take on many different forms. Common employee retention measures include creating a positive company culture, providing Learning & Development (L&D) opportunities, and offering a compelling perks and benefits package.
Employee wellbeing encompasses all aspects of employee health, including physical, mental and emotional health. There are many different factors that influence an employee’s state of wellbeing. They range from job satisfaction to financial wellbeing to experiencing a feeling of belonging in the workplace.
An Employer of Record (short: EOR) is a global employment solution that enables businesses to hire employees abroad without having to establish a legal entity in the respective country. The EOR acts as the employee’s de jure employer, while the business contracting the EOR remains in control of the employee’s day-to-day activities.
Employer payroll taxes are the taxes employers have to pay on wages and salaries paid to their employees. Payroll taxes levied on employers include employer-paid social security contributions and contributions to special funds for employee training, housing, and more. Some countries like Australia even impose an additional payroll tax that is levied on the totality of wages and salaries paid.
An employment contract is a written agreement concluded between an employer and an employee that outlines the terms and conditions of the employment relationship. The minimum requirements for employment contracts vary from country to country but generally include the details of employee and employer, the planned start date, the employee’s compensation and working hours, and information on whether the contract is concluded for a definite or an indefinite period of time.
Employment outsourcing describes the practice of outsourcing employer responsibilities to an external service provider like an Employer of Record (EOR) or a Professional Employer Organization (PEO). Legal and administrative employer responsibilities that are typically outsourced include payroll processing, HR administration, and regulatory compliance tasks.
An employment platform (or global employment platform) is a software solution which is designed to help businesses hire, manage, and pay global teams. Functionalities covered by employment platforms mostly include hiring and onboarding, payroll management, employee benefits management, and regulatory compliance.
A worker’s employment status indicates his or her legal status at work. The employment status summarizes different aspects, such as the employment type, the level of legal protection, and the rights and responsibilities resulting from the employment relationship. The meaning differs slightly depending on the jurisdiction where the term is employed.
Employment termination is when either the employee or the employer ends the employment relationship. Usually, employment termination is subject to a set of rules that must be observed. These rules include , , and regulations regarding the termination procedure.
Employment types describe the different ways for businesses to contract workers. The standard model is full-time employment, but there are several other types of employment employers can choose from. Workers might also be hired as independent contractors (or freelancers), part-time employees, or casual employees. Different countries have different employee classification types.
Enterprise Resource Planning (short: ERP) is the management of central business processes in order to achieve maximum efficiency and performance. ERP processes are usually controlled with the help of a software tool that covers different business functions, ranging from finance to HR to manufacturing.
Ethical hiring is an approach to hiring and recruiting that focuses on creating assessment processes for candidates that are free of bias and prevent discrimination. Ethical hiring practices include the use of standardized recruiting processes and the development of bias-free hiring criteria.
Federal income tax is tax levied on personal and corporate income by the federal tax authorities. It needs to be distinguished from state income tax and local tax levies which may be levied on top of federal tax, depending on the country’s tax system.
A foreign subsidiary is a legal entity that is created by a parent company based in a different country in order to engage in business activities in a different market. It is usually partly owned and controlled by the parent company. But in contrast to a local branch or representative office, a subsidiary is a completely separate legal entity that is fully operational and protects the parent company from tax liabilities in the overseas market.
A freelancer is a type of independent contractor who works for several clients at the time, either on a per-project basis or on an ongoing basis. In contrast to , freelancers are responsible for paying their own taxes and social security contributions and are not entitled to employee benefits.
Fringe benefits are employee benefits that employers offer on a voluntary basis. They are part of an employee’s compensation package and include benefits like additional insurance coverage, company car, transport and meal allowances, and more. Fringe benefits can be taxable or not.
Full-time employment is the most common employment type. It is an employment model under which the employee works a set number of hours for the employer each week. Depending on internal policies and country-specific laws, full-time employment can range from 35 to 45 hours per week. The common standard, however, is 40 hours per week and 8 hours per day.
Garden leave is a special type of leave that employees may receive upon termination of their employment contract. Basically, garden leave is paid leave that covers the period from the notice of employment termination to the employee’s last day. The concept is common in countries like the UK, New Zealand, and Australia.
Garnishments are withholdings made from an employee's wages with the aim to repay outstanding debts. Typical examples for wage garnishments are student loan repayments, child support payments, and alimony payments.
The gender pay gap (also known as gender wage gap) describes the average difference between what men and women earn in similar positions and with a similar level of experience. In other words, the gender pay gap indicates how much less women earn compared to men.
The gig economy describes a phenomenon in the modern workspace where it is increasingly common for independent contractors and to be hired for quick jobs on a flexible short-term basis. The gig economy is centered around digital platforms that connect workers with businesses looking for short-time staff that are available on short notice and under flexible conditions.
A Global Employment Organization (GEO) is a global employment solution that covers several different countries and thus allows businesses to build a global team without having to set up a legal entity in every single country where they want to hire. Another term that is commonly used for a GEO is international PEO (Professional Employer Organization).
A global employment solution is an employment outsourcing service that enables organizations to compliantly hire employees in different countries without having to open a legal entity in each location. The most common types of global employment solutions are Employer of Record (EOR), Professional Employer Organization (PEO), Global Employment Organization (GEO), and global employment platforms.
Global payroll (also known as multi-country payroll or international payroll) describes the coordination and management of payroll processes across different locations and countries. Global payroll management ideally uses a software tool to centralize and streamline all processes related to payroll processing, payroll data management, and salary payments.
A global PEO (also called international PEO) provides an employment outsourcing solution for businesses looking to hire overseas. The value of an international PEO is that it allows businesses to hire employees in a different market without having to set up a local legal entity. Another term that is often used interchangeably is .
Gross pay is the total amount of wages or salary that is paid to an employee before taxes and deductions are taken out.
Gross to net (GTN) is a term used in payroll to describe the process of calculating an employee’s net pay by taking out payroll taxes and other . Gross-to-net calculations not only ensure that employees are paid the correct wages and salaries, but also guarantee compliance with tax and payroll regulations.
Holiday pay is a voluntary employee benefit employers can provide to their teams. It basically means offering employees paid time off on the occasion of holidays such as Christmas or Labor Day. The concept of holiday pay only applies in countries where employees are not entitled to paid time off on public holidays by law.
An hourly employee is an employee whose pay is determined based on the number of hours they work every week. In contrast to who earn a fixed amount each month, an hourly employee’s pay can vary from one week to the next.
HR analytics (also known as people analytics) is the use of analytics tools to extract value from data collected during crucial HR processes like talent acquisition and recruiting. Like payroll analytics, analyzing HR data enables businesses to take data-driven workforce management decisions and improve the employee experience.
HR software is a software tool that is designed to facilitate HR management processes like talent acquisition, recruiting, benefits management, employee data management, and more. Software tools for HR management can either be offered as on-premise software or cloud-based software.
A Human Resources Information System (HRIS) is a software system used by HR teams to store, manage and access important employee data, such as employee name, social security number, tax ID, and more. The HRIS serves as the central database for employee information that is relevant for HR.
A Human Resources Management System (HRMS) is a suite of software tools that support the HR department with different tasks related to , employee data management, and general HR processes like onboarding, payroll, and benefits management.
Hybrid work is when employees can alternate between working in the office and working from home. There are different ways for businesses to go remote or hybrid, including the remote-friendly work model and the fully remote model.
Incentive pay is the term for a that is focused on performance and achievement rather than on hours worked. The aim is to motivate employees to up their performance in order to receive higher pay. The most commonly known example of incentive pay are sales , but incentives can also take on forms other than cash payments.
An independent contractor is a self-employed worker who offers his or her services to several clients. In contrast to , contractors are not employed by the business they deliver their work to, which means that they pay their own taxes and social security contributions and are not entitled to any benefits.
Indirect compensation describes non-monetary compensation that is offered to an employee on top of the pay they receive in direct exchange for their work. It’s an umbrella term that encompasses all the perks and benefits employers offer in addition to . Examples of indirect compensation include free meals, company cars, and work phones.
The job description outlines the tasks and responsibilities that are linked to a certain job position. It’s part of the upfront information potential candidates receive when applying for a new job. Job descriptions should contain all the relevant details regarding the position, including whether the job posting is remote or not.
The job interview is an essential part of the hiring and recruiting process. It’s usually the second stage of the candidate assessment after the initial review of the CV. The aim of the interview is to determine whether the candidate is a good fit for the position. For remote-first organizations, the job interview is also a good chance to find out if a candidate is remote-ready or not.
Knowledge management describes the process of storing, organizing, and sharing information within an organization. The aim of knowledge management processes is to improve operational efficiency and ensure that valuable knowledge doesn’t leave the company along with exiting employees. Knowledge management is particularly important in remote organizations with regard to onboarding and employee training.
A country’s labor law is the sum of all laws and regulations that surround workers rights and employment. It outlines the rights and responsibilities of employees and employing entities and further regulates the relationship between employees, employees, statutory authorities, and trade unions.
Learning & Development (short: L&D) is a collective term for all the professional training and career development opportunities a company offers its employees. The purpose of L&D is to equip employees with the skills and knowledge they need to perform well in their jobs and progress their career.
Leave of absence (commonly referred to as leave) is when an employee officially has permission to be absent from work for an agreed period of time. There are different types of leave, some of which are mandatory while others are voluntary. The most common types of employee leave are annual leave, sick leave, and parental leave.
Location-based pay is a that determines employee pay based on location. This means that employees earn more or less depending on the cost of living in their residential area. Location-based pay is an important concept for businesses that want to develop a global compensation strategy for their international teams.
Maternity leave is the a woman is entitled to upon giving birth to a child. The leave period is usually divided into pre-natal and post-natal leave. The right for a woman to take leave after giving birth is a mandatory employee benefit in most countries—although some countries have more generous parental leave policies than others.
Medical leave is a taken by employees for medical reasons, i. e. to recover from an illness or injury. In the United States, medical leave is regulated by the Family and Medical Leave Act (FMLA) and describes a type of leave that is distinct from paid sick leave, which is the type of leave commonly used for cases of illness and injury in other countries.
Minimum wage is the lowest amount of pay an employer has to provide in order to compensate employees for their work. Many countries around the world have statutory minimum wages that are fixed by the government. Minimum wages for certain professions can also be determined by collective bargaining agreements.
Employee misclassification happens when a business hires workers as independent contractors although they really should have the status of full-time employees. This means that the worker basically works under the same conditions as an employee without receiving any of the benefits that come with . Intentional misclassification typically aims at cutting employment costs.
Running a multi-country payroll (also known as global payroll or international payroll) means processing and managing payroll in several countries at the same time. Multi-country payroll operations are a challenge because they require businesses to find a way to unify and streamline processes, payroll providers, and payroll softwares across geographies.
Net pay is the take-home salary that remains after all the deductions (income tax, insurances, pension contributions etc.) have been taken out of the employee’s . In other words, net pay is the money that ends up in the employee’s bank account after calculating gross to net.
Non-mandatory benefits are all the perks and employee benefits employers provide on a voluntary basis. Voluntary benefits (also known as non-statutory benefits) can include additional insurance coverage (e. g. life insurance or private health insurance), , flexible working arrangements, and mental health programs.
The notice period determines how far in advance either employee or employer have to notify the other party in case of resignation or dismissal. Minimum notice periods are usually defined in a country’s . Longer periods of notice can be agreed in the individual employment contract. The covers the time span between the receival of the and the employee’s last day at work.
Offboarding describes the combined HR processes that are needed to formally manage an employee exit. It marks the end of the and includes tasks like removing the employee’s access to tools, systems and communication channels, managing the handover to the employee’s replacement, and conducting an exit interview. Smooth offboarding is important to ensure a positive employee experience upon . There are additional challenges to consider when offboarding an employee remotely.
Offshoring describes the practice of relocating a certain business function or process to a different country in order to reduce costs. The difference to is that offshoring is centered around the geographic relocation of the chosen business processes, while the idea behind outsourcing is to transfer the responsibilities for certain processes to an external service provider.
The onboarding process marks the beginning of the and is therefore crucial for creating a positive employee experience right from the beginning. Onboarding starts well before the employee’s first day at work and continues throughout his or her first month with the company. An employee onboarding checklist can help ensure the process runs smoothly, which is particularly important for remote employee onboarding.
On a general level, outsourcing describes the practice of transferring the responsibility for certain business processes to a third party rather than managing them internally. The aim behind outsourcing is to save costs and maximize operational efficiency. But outsourcing can also become necessary because of a lack of internal expertise. Examples of outsourcing include payroll outsourcing, employment outsourcing, and customer service outsourcing.
Overpayment is when an employee receives more pay than he or she is entitled to. It’s a common payroll error that is typically corrected with the following payroll run by deducting the amount of the overpayment from the next paycheck.
Overtime is the collective term for additional hours worked. It is work that employees put in on top of the regular weekly working hours that are fixed in their employment contract. If an employee works overtime, he or she is usually entitled to additional pay. In many countries, overtime pay is somewhere between 150% and 200% of the employee’s normal wages.
Paid leave is any type of paid absence from work employees are entitled to either under local or under the clauses of their individual employment contract. There are different types of leave that can be paid, including annual leave, , and parental leave. During the period of absence, the employee continues to receive his or her regular pay.
Paid-time off (short: PTO) describes an employee’s accumulated leave entitlement, i. e. the time an employee can take off work while still receiving his or her regular pay. It is an umbrella term for different types of leave from work and typically encompasses annual leave, sick leave, parental leave, and more. Companies usually define their employees’ PTO entitlement in the form of a PTO policy.
Parental leave describes the period of time during which a parent is allowed to go on leave in order to take care of a newborn (or adopted) child. It is a statutory employee right in many countries, but some countries have more generous parental leave policies than others. In some cases, parental leave is used as an umbrella term for and , while in other cases, it’s used to refer to a period of leave parents of newborn children are entitled to once they have used up their initial maternity or paternity leave entitlement.
Paternity leave is a leave entitlement for male employees whose partners have recently given birth. In most Western countries, paternity leave is somewhere between 5 and 15 days which are to be taken shortly after birth to give the father time to bond with his newborn child. However, many countries have more generous parental leave policies that entitle fathers to an additional period of in the months before the child reaches two or three years of age.
A pay period is the period of time for which employees are paid. It covers the stretch of time between two consecutive payroll runs. Common types of pay periods are weekly, bi-weekly, semi-monthly and monthly. The pay period determines the pay frequency, and vice versa.
A pay stub, also known as payslip, is a written document that provides detailed information on the different pay elements that are included in an employee’s remuneration for a certain pay period. A pay stub details the wages, payroll taxes, and other deductions that have been taken out of the employee’s .
In general terms, a payout is a payment of existing funds to a recipient—typically referring to a larger sum of money. The term can be used in many different contexts. For instance, it can be used to describe an insurance payout, a dividend payout, or an equity payout.
The term payroll can have different meanings depending on the context in which it is used. The most common meaning of payroll is the process all businesses must undertake on a regular basis to pay their employees. In addition, payroll can also refer to the business function charged with managing said process or to the number of employees that are on the company’s payroll list.
Payroll accounting describes the sum of all the accounting activities a business undertakes to manage, record and keep track of its payroll transactions. It covers anything from tracking salary payments and payroll taxes to creating financial journal entries for reporting and bookkeeping purposes.
Payroll analytics is the use of data analytics tools to analyze payroll data, gain deeper insights into payroll costs and uncover underlying workforce trends and patterns that can help a business understand the impact and effects of its overall operational strategy. The aim of leveraging payroll analytics is to get clean payroll reporting.
A payroll audit is a thorough assessment of a business’s payroll processes, data and records that aims at uncovering errors and mishaps and verifying that all the processes regarding payroll are compliant and up to date. Payroll audits can either be conducted internally or by an external auditor.
Payroll automation is when a business streamlines and automates its payroll processes. The aim is to reduce the amount of manual intervention and increase the overall efficiency of the business’s payroll operations. The key towards automating payroll is to use a payroll software that leverages automation technologies. Parts of payroll that can be automated include data input, data validation, and payroll calculations.
Payroll components is the collective term for the different elements that make up an employee’s pay. This includes different compensation elements as well as payroll taxes and other deductions that are taken out of the employee’s . Examples for common payroll components are salaries, wages, , , expense reimbursements, income tax, and .
Payroll consolidation is a key concept in global payroll management. It describes the process of centralizing a business’s multi-country payroll by combining different payroll vendors and systems in one single platform. With regard to payroll data, consolidation refers to the process of standardizing data formats and creating a centralized database for all the data that is generated during payroll processes across geographies.
A payroll cycle (short: pay cycle) is the time span between two consecutive paydays. It is not to be confused with the pay period, which is the period of time for which employees are paid. Sometimes, the term payroll cycle is also used to refer to the sum of activities that businesses need to undertake in order to process payroll.
Payroll data is the umbrella term for the combined data output of the payroll process. Examples of payroll data include salary payments, , , income tax liabilities, and the number of sick leave days. Depending on the context, payroll data can also mean the data input needed for payroll.
Payroll deductions are all the deductions that are taken out of an employee’s wages during gross-to-net calculations. Examples of payroll deductions include income tax payments, social security contributions and student loan repayments. There are and . While pre-tax deductions are taken out before income tax is calculated, post-tax deductions are withheld from the employee’s wages only after all the other payroll taxes have been calculated.
Payroll integrations are software integrations that connect a business’s payroll system to other tools and softwares that are somehow linked to payroll. The most prominent example of payroll integration is connecting payroll and HR systems to enable automated data flows and updates across systems. Other integration possibilities in payroll include accounting, expense reporting, and time and attendance management.
Payroll KPIs are the different metrics and indicators businesses should keep track of in order to evaluate the performance of their payroll. The most important payroll KPIs include payroll cost, payroll processing times, and payroll accuracy as indicated by the number of payroll errors per .
Payroll management is the administration of all payroll-related processes, data sets and financial records. The role of a payroll manager involves a variety of different tasks that range from payroll calculation to payroll validation to payroll reporting. There are different ways how businesses can manage their payroll: manual payroll management, software-supported payroll management, and payroll outsourcing.
Payroll outsourcing is the act of transferring the responsibility for certain payroll processes and tasks to an external service provider. Depending on the payroll provider, businesses can choose between partially and fully managed payroll services. Fully managed payroll usually includes the full service range from calculating gross to net to handling payroll taxes and statutory reporting.
A payroll provider (also known as payroll vendor or payroll company) is a service provider that specializes in providing payroll outsourcing services to other businesses. At the most basic level, the payroll vendor will process payroll and calculate gross to net for the client business’s employees. Depending on the provider, payroll services may also include payroll tax administration, payroll compliance support, and payroll record keeping.
Payroll reporting is the process of making payroll data and insights available to statutory authorities and other departments in the company. Internal payroll reports support better financial planning and budgeting, while statutory payroll reporting is a central part of payroll compliance. Statutory payroll reporting includes declaring income and payroll taxes withheld from employee wages and salaries on an ongoing basis and submitting additional quarterly and annual summary reports.
Running payroll is another term for processing payroll. A payroll run is the sequence of processes that need to be completed by a business in order to pay its employees. The payroll run usually takes place a couple of days before the actual pay date and always covers a specific pay period for which employees need to get paid.
Payroll security is the collective term for all the different security measures taken by a business in order to protect its payroll data. There are several different measures businesses can implement in order to make payroll systems and processes more secure. These measures include regular payroll software updates, limiting access to payroll data and systems, and segregating payroll duties.
The term ‘payroll services’ is often used interchangeably with ‘payroll provider’ or ‘payroll vendor’. It basically describes a service provider that provides services surrounding payroll. Using payroll services is one of the different options for managing payroll businesses can choose from, another one being payroll software.
Payroll software is used for administering and automating payroll processes like gross-to-net calculation, payroll tax management, and payments. Software for payroll processing can either be cloud-based or self-hosted. Depending on the software, it may also include additional features, such as payroll analytics and reporting.
In the broadest sense, the term payroll taxes refers to all the different taxes that are levied on employee wages and salaries. However, the definition of payroll tax differs from country to country. While some countries define payroll tax as the tax levy incurred by employers when paying their employees (i. e. employer-paid social security contributions and more), others take a broader approach by including income tax, employee social security contributions, and more.
Performance-based pay is a that rewards employees based on their achievements. It is usually offered on top of a predefined baseline salary which is paid to the employee regardless of his or her performance. The advantage of offering performance-based pay is that it motivates employees to go the extra mile and that it can help attract new talent.
Post-tax deductions (also known as after-tax deductions) are that are taken out of an employee's salary after all other payroll taxes have been withheld.
A pre-tax deduction (also known as before-tax deduction) is money that is withheld from an employee’s salary before the calculation of statutory payroll taxes. Pre-tax deductions decrease the employee’s taxable income and hence reduce his or her overall tax burden.
The probation period (or probationary period) is the initial period of an employee’s employment during which he or she is on trial. Employers can use this period to evaluate whether the employee is really suited for the position and whether he or she fits in with the rest of the team. During the probation period, both employee and employer can terminate the employment relationship without indicating a reason. In most countries, the during probation is shortened to a couple of days.
A Professional Employer Organization (short: PEO) is an employment outsourcing service that allows businesses to transfer some or all of their employer responsibilities to a third party. The services of a PEO generally include administrative and HR-related tasks like payroll, benefits management, and employee registration. The PEO hence acts as a co-employer to the client business.
Quiet quitting is a rising trend in the world of work that describes a change in employee attitude and motivation. Instead of putting in all the time and effort that is needed to achieve good results, “quiet quitters” reduce their efforts to a bare minimum and only put in the amount of work that is absolutely required.
Real-time processing refers to processing that is done immediately. In other words, data is processed the very same moment it becomes available, which means that the processing output is also available almost instantly. With regard to payroll processing, real-time processing is what enables real-time insights into payroll data and payroll costs.
Employee relocation is when employees move to a different region or country either for personal reasons or upon their employer’s request. Employee relocation for reasons other than work can be difficult to manage for businesses because of the tax implications it may have for both employee and employer. Pay adjustments are yet another aspect to consider—at least when the company follows a compensation strategy that is centered around .
A remote-first organization works and operates remotely by default. This means that all the workflows and processes are designed to match the needs of a distributed team. A remote-first organization might not even have an office since all team members work remotely. The main advantages of being remote-first include cost savings on utilities and real estate and the ability to access a global talent pool.
In contrast to a remote-first organization that is remote by default, a remote-friendly organization only allows remote work to a certain extent. Instead of going fully remote, remote-friendly businesses opt for a hybrid approach, hence combining remote work with several office days per week. Processes, decision-making and workflows are mostly still centered around the office, with synchronous communication being the default setting.
A remote job is a position that doesn’t require the employee to work from the company office. Instead, the employee carries out his or her task from home or from any location other than the office. When applying or recruiting for a remote job, both candidates and recruiters have to be careful when it comes to the wording in the actual job description to make sure it is really remote. Some positions are advertised as remote although they cannot be carried out in a completely remote way.
Remote hiring is the process of identifying and recruiting candidates for remote positions. Hiring employees remotely requires a different approach compared to hiring for traditional in-office jobs. Not only because the pool of candidates is a lot bigger due to non-existing geographical restrictions, but also because the entire hiring process from interviewing to onboarding needs to be managed remotely.
A remote interview is a job interview that is conducted virtually with the help of technology. In contrast to a normal job interview, the interviewer and the interviewee are in two separate locations and communicate via videoconferencing. While virtual interviews facilitate remote hiring and allow businesses to recruit candidates from different countries, they also come with additional challenges. For instance, it’s more difficult for recruiters to really get to know the candidate when not meeting them face to face.
Remote work is an umbrella term for different alternative work models under which employees work from a location that is not the company office. For instance, remote work can mean working from home or working from a different country while on workation. The main aspect that distinguishes remote work from traditional work is that the employee’s place of work is not the office. That’s why different remote work tools and asynchronous communication are needed to enable collaboration between team members.
Remote work requires a different mindset on both the employee and the employer side. This also means rethinking company culture. A company’s remote work culture is the set of values and behaviors that define how the members of the remote team work together and interact with each other. The aim is to establish a feeling of trust and to promote collaboration and communication to overcome the physical distance.
A remote work policy is a written document containing all the rules and guidelines that detail how remote work is managed in an organization. It establishes rules for employees to adhere to and sets clear expectations so that team members know what is expected of them at all times. Aspects to be outlined in a remote work policy include working hours, communication channels, equipment, and performance.
A remote worker is a full-time employee or contractor that works from a location other than the offices of the company he or she works for. Remote workers benefit from a high level of flexibility when it comes to performing their tasks and are generally more autonomous than office workers.
Remuneration is the collective term for all the compensation and benefits provided to an employee in return for his or her work. It typically encompasses pay elements such as , , and pay, as well as non-monetary benefits such as gym memberships or meal vouchers.
Retroactive pay (short: retro pay) is when a payment to an employee is issued retroactively when really it should have been made in an earlier pay period. A common scenario where retroactive pay is needed is when a payroll error, such as underpayment, has occurred. Another common retro-pay scenario is when pay raises are not communicated and registered in the payroll system on time, which means that they are not accounted for during the respective .
A salaried employee is an employee who receives a fixed monthly salary as remuneration for his or her work. In contrast to an , a salaried employee’s monthly income is not dependent on the number of hours worked in the respective month.
Semi-monthly pay is when employees get paid twice a month. A semi-monthly payroll is not to be confused with a bi-weekly payroll, which means that the employee is paid every two weeks. Processing payroll on a semi-monthly basis leads to 24 pay periods in a year, while bi-weekly payroll processing means having 26 pay periods per year. Semi-monthly pay is commonly used for .
Severance pay (also known as severance package) is an amount of money an employer pays to an employee after employment termination. It is a legal requirement in many countries to provide severance to employees who are terminated for reasons other than misconduct or underperformance. The amount of severance pay is usually based on the employee's tenure with the company.
A shadow payroll is a payroll set-up that is used to ensure payroll tax compliance for employees on international assignments. It is a second payroll that is processed for the sole purpose of determining how much is owed in payroll taxes in the host country, while the employee’s net wages are calculated and paid out via the main payroll that is processed in the employee’s home country.
Sick pay is a statutory employee benefit in many countries. It is the pay employers provide to employees who are unable to work because of illness or injury. In many countries, there is a waiting period of a couple of days before the sick pay entitlement kicks in. Employers are typically only obligated to provide sick pay for a certain number of weeks. Thereafter, the employee receives statutory sick pay from the respective social security body.
Statutory employee is an that is unique to the United States. A statutory employee is defined as an independent contractor who is considered an employee for tax withholding purposes. This means that the employer withholds payroll taxes on behalf of the contractor and also pays the employer share of the mandatory .
Offering employees stock options means giving them the option of buying a certain number of shares in the company. Stock options, also known as equity, are a popular way of diversifying an employee’s compensation package because they provide an additional incentive to improve personal performance. A distinction is made between qualified and non-qualified stock options.
Supplemental pay is pay that is provided to employees on top of their . It can include different pay elements, such as , or pay. Offering supplemental pay can be complicated with regard to payroll taxes because not all types of supplemental pay are taxable.
The Society for Worldwide Interbank Financial Telecommunication (short: SWIFT) is a messaging and transaction network for financial institutions that enables banks to exchange information across borders. SWIFT is the main system used for processing international payment orders, but it also has its downsides—notably long processing times and high transactional costs.
An organization’s talent acquisition function is responsible for identifying current and future staffing needs and taking action to find and recruit suitable candidates to fill job vacancies. Talent acquisition encompasses a variety of different tasks and processes, from strategic workforce planning to job advertising to recruiting. Talent acquisition is not to be confused with talent sourcing, which is usually considered to be a more passive approach to identifying potential candidates.
Talent sourcing is the process of researching, identifying and reaching out to potential candidates to build a growing pool of contacts to fill future job openings in an organization. There are different approaches to sourcing talent, including the creation of an internal recruiting function and the use of external contingency recruiters.
The taxable wage base is the amount of income for which an employee is required to pay . In most cases, the taxable income is equal to the employee’s .
A Tax Identification Number (or Taxpayer Identification Number in the U.S.) is a unique sequence of digits that is issued by the federal tax authorities for the purpose of tax identification. Individuals are required to provide their personal Tax Identification Number during every exchange with the tax authorities.
A tax return is the collection of forms and documents that must be submitted to the tax authorities for the purpose of calculating the amount of income tax that needs to be paid. Information to be provided in the tax return includes earned income, expenses, and the amount of income tax and payroll taxes that have already been paid during the tax period in question.
Team building is a collective term for activities that aim at strengthening social relations among work colleagues and improving collaboration within a team. Integrating team building activities into the team’s weekly schedule can help improve productivity and trust within an organization. When working with remote teams, team leaders and employers need to find suitable virtual team building activities to foster connections between team members.
Team management is a collective term for all the processes, activities and skills involved in managing a team of employees with the objective of achieving a common goal. It encompasses various different responsibilities, including mediating conflicts between team members and providing motivational support and constructive feedback. Managing a team can be challenging, especially when working with a remote team.
In contrast to a permanent employee, a temporary employee works at an organization for a predefined period of time. Temporary employees can either be hired directly based on a fixed-term employment contract or through a temp agency.
A letter of termination is a formal part of the employee termination process in many countries. It is a written letter in which the employer officially informs the employee of his or her termination and outlines the reasons that have led to the dismissal. The moment in which the employee receives the termination letter usually marks the beginning of the .
Time to hire is an HR metric that is used to measure the time that passes between the first contact with a potential candidate and the moment the applicant accepts the job offer. The shorter the time needed to hire a qualified candidate, the higher the efficiency in the hiring and recruiting function.
Unlimited (i. e. paid time off) is a leave management approach under which employees are not assigned a fixed number of paid days off, but can instead request paid time off whenever and for whatever reason (e. g. sickness or vacation) they need to. In theory, there is no limit to how many days of leave employees can request under an unlimited PTO policy, as long as they manage to keep up with their work.
Employees who have to take time off work but who have used up their quota for the year can request unpaid time off. Unpaid time off means that an employee is allowed to stay away from work, but that he or she does not receive pay during the period of absence. Requesting unpaid time off can also be necessary when the employee has personal obligations that are not covered by the company’s PTO policy.
A visa is an official document that allows the person whose name it is in to enter a foreign country. Visas are important in the context of global mobility, since they are crucial for ensuring that employees that are sent on international assignment will be allowed to enter the host country. A visa type that is particularly relevant for businesses with globally distributed teams is the remote work visa which enables remote employees to stay and work in the visa country for a certain number of time without triggering tax liabilities.
Work permits are a legal requirement for employees that are sent on international assignment. A work permit is the legal document that grants foreign employees the right to work in the host country. It must usually be obtained before entering the country.
Workforce is the collective term for all the people that work for a company. A business’s workforce can comprise different types of workers, including part-time employees, , , and independent contractors.
A workweek is a fixed seven-day period (i. e. 168 hours) that is determined by an employer and used as a reference for an employee’s work schedule. Comparing the employee’s actual hours worked against his or her standard weekly schedule tells the employer how much overtime the employee has put in. An employee’s workweek can start on any day of the week.
Wrongful termination (also known as wrongful dismissal or wrongful discharge) is when an employee is terminated under circumstances that represent a breach of the employee’s employment contract, violate company policies, or go against existing employment laws.
© Lano Software GmbH 2023