Payroll Software

Payroll software can definitely take some of the hard work out of running a payroll for a company. However, if you are just getting into payroll and payroll software, you might soon realize that there is a superfluity of confusing jargonistic phrases and other terminology entirely proprietary to the payroll world. Learning to speak the language will certainly make navigating the world of payroll and payroll software much easier. Some words or phrases may also be used in other areas of business and some may only be used in payroll. Either way, knowledge is power. So here are some of the more commonly used terms in the industry of payroll to help you better understand what is being said and what is going on.

• Wage orders – these are certain wage and hour standards which can be set by state agencies in some industries
• Wage attachment – a garnishing of an employee’s wages mandated by some outside power (for instance court order) for the purposes of paying a debt
• Tip credit – employees that receive tip compensation in addition to pay receive a special minimum wage. This is a credit against that minimum wage.
• Statutory employee – this is an employee that is considered self-employed for the purposes of income tax and considered an employee for Social Security and Medicare tax.
• SEP (Simplified Employment Pension – this is an IRA (Individual Retirement Account) that is available to some of the smaller employers. As the name implies it is a simplified, and low cost, retirement plan for both the employer and their employees.
• SUB (Supplemental Unemployment Benefits) – employer funded pay given to an employee who has been terminated in addition to standard unemployment compensation. SUBs are taxable as regular pay but not for Medicare, Social Security, or federal unemployment taxes.
• Shift differentials – augmented pay for working undesired shifts
• PEO (Professional Employer Organization) – an outsourced company that provides services for some HR work.
• Qualified plan – benefits plans that qualify for IRS tax favored treatment.
• Reciprocity – a granting of privileges between two jurisdictions, usually states, where a privilege has been granted to one jurisdiction in reciprocation for being granted that same privilege BY that same jurisdiction.
• SIMPLE (Savings Incentive Match Plans for Employees of Small Employers) Plans – similar to an SEP in that it is specifically available to smaller employers. The limit is 100 employees or less and can be set up as an IRA or a 401(k). It is a tax free contribution matched by the employer.
• MMREF (Magnetic Media Reporting and Electronic Filing) Specifications – specifications for electronically filing the W-2s with the Social Security Administration.
• ESPP (Employee Stock Purchase Plan) – a benefit that enables an employee to purchase company’s stocks at less than current market price. Related to ISO.
• ISO (Incentive Stock Option) – a stock option that is statutory and enables an employee to purchase, at less than current market price, company stock.
• HAS (Health Savings Account) – health plan which is attached with one’s savings account, high deductible, used for building finances for the purposes of certain medical expenses that qualify.
• HCE (Highly Compensated Employee) – this is an employee that meets the following criteria: Top 20% of employees for highest compensation, 5% owner, and (according to IRS standards) exceeds a specific compensation level annually.
• Gross up – a calculation that some employers can use to figure the taxable gross wages it will pay an employee.
• EFTPS (Electronic Federal Tax Payment System) – set up by the US Dept Of Treasury which allows for taxes to be filed free of charge electronically.
• Elective deferral – a deferral of payment, chosen by the employee, of a portion of that employee’s compensation for either a defined investment plan, payment, or other.
• Cafeteria plan – a type of employee benefits plan that allows them to utilize pretax wages to create their own benefits plan.
• Accounting period – the period which is covered by one income statement.
• Accelerated Deposit rule – this is also known as the one day rule. It is basically when an employer accumulates $100,000 tax liability or greater during any one deposit period must deposit the withheld taxes within one day after the day the liability occurred.

This is by no means a definitive list of every phrase used in the payroll industry. Indeed there are always new terms coming into play and certain specific software companies in the industry might have terminology specific only to their environment. However, this is a good ‘starter list’ to get you going. Knowing these phrases will allow you to hit the ground running in your search for payroll software. Consider this the first step on your journey to the ease and convenience that payroll software embodies.

Payroll software industry, as any other industry, has many terms one should become familiar with before starting to use payroll software.

For any business in today’s current fast paced market climate, payroll software is very common place. Within the payroll industry there are a few different options available (not using payroll software is really not a very realistic option). The first option is to have an in-house payroll department. This option is a big investment for any company as you have to keep staff dedicated to the job of payroll trained and up to date. However it does provide the highest degree of control for a company as you are entirely hands on throughout the process.

The second option is to pay a specialized company to handle your payroll for you entirely. This is virtually the opposite of the in-house option. There is no staff dedicated nor any training required since this is all covered in the cost of the service provider. The final choice is an in-between of the previous two. This is the online payroll service. Though the software does not run on your company’s systems and there is little to no installation, there is still the requirement for someone to have knowledge of payroll and tax laws because you will be entering the information yourself. The cost for this option can vary. Here is a closer look at all three options.

In house

Your company will have to purchase payroll software, install it in your systems, and train personnel on using the software. It is a very important decision of which payroll software will be the best for your company. It is important that the program you choose is fully able to be integrated with the rest of your company’s software or the payroll software might even come bundled as part of a larger human resources software or financial software package. Once your company has chosen the right program for the job, you need to have it installed by IT workers. There might even need to be a dedicated employee to general upkeep of your network. Finally, once the software has been chosen and installed, you need to properly train workers on not only how to use the software, but also tax laws in general. This is no light job. Your company can not only lose a considerable amount of money if your payroll department is not running effectively, but you can also run into major legal trouble. Staying up to date on tax rules and other payroll issues is very important.

Obviously this option is for larger companies where running a payroll department is financially attractive. If you have employees trained as well as the employees working for payroll service providers and you have the budget to do it, the in-house payroll option is great.

Outsourced payroll

This is where your company is entirely hands-off in the payroll process. You simply pay another company to do absolutely everything and wash your hands of it. The service provider will print and deliver checks for you, file tax returns, and take care of your year- end tax returns as well.  Depending on your needs and how complicated your payroll is, you can potentially get a very decent deal financially. On the other hand, you might settle on an over-priced company that is not as effective as its competitor. The cost on this option is entirely contingent upon the research you do before deciding what service to use.

This is the simplest of the options and also the least controlled. You do have some options available for restitution if your service provider does make mistakes such as a lawsuit or simply taking your business elsewhere as a threat. However if the company is ineffective you might lose out on tax breaks or other beneficial scenarios. The thing is that you might never know you are missing out on them because you are entirely out of the loop. This is a good option for businesses that simply want nothing to do with the headache that payroll can be. If you are a smaller business (20 or less employees) it certainly might benefit you to outsource your payroll.

Online payroll software

This is sort of an in between for the previous two options. There is no installation or maintenance of software to worry about as the program is entirely accessed online. This can save money on IT costs. There are varying levels with this option. You can set it up where it is much closer to a service provider and all you are doing is simply entering in the basic information or you can have it where they are simply providing the software and you are in control of everything else. Obviously if you are still entering all of the information yourself this will mean training and maintaining a knowledgeable and effective payroll staff.

With any of the available payroll options your company decides to go with, research and knowledge will go a long way. Whether it is research on which payroll software to purchase or whether it is on payroll service providers, make sure that you are getting quality for your money.

Any successful business will have a great use of payroll software, however there are a few different options available such as outsource, in-house and online payroll software.