Glossary of Terms and Definitions: Payroll, Insurance, HR and More

Whether you’ve been in business for years or for a day, there are many terms and phrases you may have never heard of. Our Glossary of Terms and Definitions breaks down the terminology you need to know in ways that are easy to understand.

A

Accrual Accounting

An accounting method that recordsth revenues as they are fully earned and expenses as they occur.

Attribution Rate

The rate at which a company’s employees resign, retire, or leave and are not replaced.

Affordable Care Act Reporting (ACA Reporting)

Businesses subject to ACA and Applicable Large Employer and Self-Funded Plan requirements are mandated to submit all proper forms by their expected due dates in order to remain in ACA compliance.

Arrears

Refers to the practice of compensating a service provider after the terms of the agreement have been met or that a business is behind on payments.

Applicant Tracking System (ATS)

A software system used to collect, store, and analyze candidate information, filter applicants, and streamline the recruiting process.

Absence Management

The policies and procedures businesses develop to manage employee absenteeism in accordance with federal and state leave laws.

At-Will Employment

A working relationship where either the employer or the employee has the right to terminate employment at any time, with or without cause, and with or without warning.

Affordable Care Act (ACA)

The 2010 healthcare reform law designed to make healthcare more affordable and accessible to more people.

Accountant

A financial professional that can record and prepare finances, conduct audits, and more.

Annual Income

The amount one earns in a year.

Administrative Services Organization (ASO)

An organizational model where specific HR tasks are outsourced to a third party without any “co-employment” arrangements.

American Rescue Plan Act

Signed in 2021, this is a relief package aimed at helping businesses hit hardest during the COVID-19 pandemic.

Accrual

The accumulation or increase of something over time, especially payments or revenue.

Automatic Gratuity

Classified by the IRS as revenue for the business and the dollars distributed to staff as non-tip wages.

Asset Depreciation

The decrease in the value of an asset over time.

Accounts Receivable

Money or balance owed to a company from a customer.

AI-Assisted Recruiting

Software solutions powered by artificial intelligence that optimize various stages of the hiring process.

Automated Clearinghouse (ACH)

Used to move money between bank accounts.

Adjusted Gross Income (AGI)

Total income from all sources minus certain adjustments listed on Schedule 1 of Form 1040.

B

Business Insurance

Also referred to as commercial insurance, it is insurance coverage that provides financial protection to businesses who experiences an unforeseen loss that can range from small to large scale.

Business Liability Insurance

Also referred to as general liability insurance, is a type of insurance coverage that helps protect a business against third-party claims of bodily injury, property damage or personal injury caused by your business.

Bereavement Leave

Paid or unpaid time away from work granted to employees after the passing of a covered individual.

Bereavement Pay

Payment for the time an employee has taken off due to bereavement leave.

Beneficial Ownership Information (BOI)

The information or details about the individuals who own or control a company.

Base Pay

Also referred to as base salary or an hourly rate, is the fixed amount an employee agrees to be paid for their work prior to beginning.

Benchmarking

The process of comparing industry and general business best practices against your own to identify performance gaps and achieve competitive advantages.

BOP Insurance

An acronym for Business Owner Policy, this is a type of bundled insurance policy business owners can have to protect their company and employees.

Business Equity

Often the key indicator of a company’s financial wellbeing, equity is useful in pursuing strategic growth or acquiring bank loans.

Benefits Administration System

A solution or software offered by a third-party, like Paychex, that can manage employee benefits on behalf of a company.

Business License

A legal document that permits a business to operate within a specific jurisdiction.

Bank Reconciliation

A schedule that illustrates the differences between the balance on a statement provided by the bank and the balance on the books of an organization at the end of a given period.

Business Trends

Technologies, practices, and strategies that are affecting organizations across industries.

Break-Even Point

The point where one is earning as much as they are spending.

Break-Even Analysis

An analysis that paints a clear picture of pricing and financials allowing a business to make better financial decisions.

BOI Reporting

The Beneficial Ownership Information reporting mandated by the federal government under the Corporate Transparency Act for some companies.

Bookkeeping

The process of keeping record of financial transactions.

Business Continuity Plan (BCP)

A strategy outlining how an organization will maintain or resume business functions during and after disasters, accidents, or threatening activities.

Buddy Punching

The act of an employee clocking in or out on behalf of another employee.

Bi-Weekly Pay

The pay period in which employees receive their paychecks every 2 weeks.

Backup Withholding

A payer is required to withhold tax from payments not otherwise subject to withholding.

Background Checks

A service performed to confirm an applicant’s background information during the hiring process.

Boomerang Employee

A person who leaves their job for a period of time, then seeks to return.

Business Efficiency

How well a business can convert the required time, effort, materials, and capital in relation to its output.

Business Legal Structure

All businesses must establish a legally recognized category of organization that influences how the business will operate regarding taxation and recordkeeping.

C

Construction Payroll Services

Solutions designed for streamlining payroll processes for construction and other skilled trades.

Cost of Living Adjustment (COLA)

An increase in compensation intended to help employees maintain the value of their pay against inflation.

Cash Basis Accounting

An accounting method where income is recorded when actually received and expenses are recorded as they’re paid.

Childcare FSA

Also known as dependent care FSA, allows employees to pay for certain services such as summer camp or child/adult daycare on a pretax basis.

CalSavers

A California state-administered individual retirement account (IRA) program for employers that do not offer an employer-sponsored retirement plan.

Compensation Plan

A company’s set of guidelines for delivering employees’ base pay, bonuses, and equity.

Cyber Liability Insurance

A type of business insurance coverage that offers financial protection in the event of an electronic data breach, cyberattack, or some other cybersecurity issue.

Consolidated Omnibus Budget Reconciliation Act (COBRA Insurance)

The continuation of group health, dental, and vision insurance coverages, as well as Health FSA and HRA benefits to certain employees and their qualified beneficiaries following termination or other qualifying events.

Co-Employment

When utilizing a PEO, the employer and PEO, may enter into a contractual arrangement where they bear employer responsibilities for covered employees, not as joint employers but as independent contractors of each-other.

D

Direct Deposit Card

A form of payment, where employees receive their wages through a prepaid debit card. The card is not linked to the employee's bank account but is instead linked between the paycard vendor and a bank.

Dependent Care FSA

A pre-tax benefit account used to pay for the various child and adult care programs that allow a caregiver to work.

Direct Deposit

An electronic funds transfer (EFT) method that allows employers to automatically deposit an employee's earnings directly into their designated account(s).

Digital Nomad

A person who travels freely while working remotely.

Dental Insurance

A typically voluntary benefit plan that offers coverage for dental healthcare costs.

E

Exempt Employee

An employee who is not entitled to minimum wage and overtime pay protections under the FLSA and state-specific requirements, typically paid on a salary basis.

Employee Assistance Program (EAP)

Typically, a part of a larger benefits package, it provides employees sources to counseling, referrals, and other support services.

Employers Liability Insurance

Insurance that helps with the financial cost associated with lawsuits against an employer resulting from workers who have suffered a job-related injury or illness not covered by workers’ compensation.

Employment Practices Liability Insurance (EPLI)

A type of business insurance policy that helps cover company losses associated with certain employment claims alleging violations of the rights of a current employee, former employee or applicant for employment.

Employee Value Proposition (EVP)

A set of beliefs, attributes, and offerings used to attract and retain qualified employees.

Employee Termination

The end of an employee’s time working with a company.

Employer of Record (EOR)

Similar to a PEO, but generally assumes responsibility for all facets of employment, such as payroll, benefits, taxes, and compliance.

Employee Retention Tax Credit (ERTC)

This was the refundable payroll tax credit under the CARES Act in response to the COVID-19 pandemic, designed to incentivize businesses to keep employees on their payrolls.

Electronic Federal Tax Payment System (EFTPS)

The tax payment service provided by the U.S. Department of Treasury.

EEO-1 Reporting

One type of equal employment opportunity reporting that requires certain employers to report demographic workforce data, including data by race/ethnicity, sex, and job categories.

F

Full-Time Employees

Employees who work full-time hours each week, typically with 40 hours serving as the standard benchmark.

Federal Insurance Contributions Act (FICA)

A tax both employers and employees must pay that fund Social Security and Medicare benefits.

FICA Calculator

A calculator tool that can help determine payroll tax obligations.

Form 941

The Employer's Quarterly Federal Tax Return, it reports wage withholding to the IRS for federal income taxes and both the employees' and employer’s share of FICA taxes.

Federal Unemployment Tax Act (FUTA)

A federal law that requires employers to pay a payroll tax used to fund unemployment compensation programs.

Form 1120

The corporate tax return used by companies organized as a C-corporation.

Form 940

The Employer’s Annual Federal Unemployment (FUTA) Tax Return listing the total payments to all employees, reduced by any payments exempt from Federal Unemployment Tax.

Flexible Savings Account (FSA)

Also known as Flexible Spending Accounts or Flexible Spending Arrangements, this is a pre-tax account that employees can contribute to and spend on qualified out-of-pocket medical or dependent expenses.

FSA Calculator

A calculator that can estimate possible healthcare savings and contributions associated with your Flexible Savings Account.

Form 5500

An annual report, that informs the Department of Labor about a 401(k) plan's financial conditions, investments, and operations. This report also applies to certain employee benefit plans.

G

Gross Revenue

The total dollar amount gained from sales before deducting expenses, returns, discounts, or allowances.

Gross Income

The total amount of profit generated by a company, minus the cost of the goods sold.

General Liability Insurance

Also referred to as business liability insurance, is a type of insurance coverage that helps protect a business against third-party claims of bodily injury, property damage or personal injury caused by your business.

Gross Pay

The total amount an employee is paid before all applicable deductions.

Gross Profit

Also known as Gross Income or Cost of Goods Sold (COGS), it is the total amount of profit generated by a company, minus the cost of the goods sold.

Group Health Insurance

A health coverage benefit businesses can offer to its employees and their families.

General Ledger

A listing of individual transactions grouped by account.

Group Term Life (GTL) Insurance

A life insurance policy benefit businesses can offer to their employees that provides a death benefit (payment) to beneficiaries if the insured person dies during the coverage period.

H

Health Savings Account (HSA)

An account employers can offer to their employees that offers tax advantages on funds set aside for qualified medical expenses.

HR Compliance

The process of ensuring that a business adheres to applicable HR laws, regulations, and guidance from enforcing agencies, including developing policies and procedures that support adherence to those standards.

HR Services

The services provided by a third-party, like Paychex, that aid a business in managing their workforce through administration or compliance support.

Human Capital Management (HCM)

A set of processes and tools that businesses use to systematically improve recruiting, management, and performance.

Human Resources (HR)

The internal or external business unit charged with ensuring a company's employees are equipped with everything needed to excel at their jobs.

Health Reimbursement Arrangements (HRA)

A reimbursement program fully funded by employers that supplement health insurance or is offered in place of a group health plan.

High-Deductible Health Plan (HDHP)

A health plan where employees and employers often pay less in premiums, but plan participants may be expected to pay more out of pocket.

Hazard Insurance

Coverage that helps with the costs of repairing or replacing the physical structures and equipment of a business after natural disasters.

HR Business Partner (HRBP)

A human resource professional who integrates business strategy with people management practices by aligning HR processes to the business's overall goals.

Hyperinflation

A severe economic condition characterized by an extraordinarily rapid increase in prices.

HIPAA (Health Insurance Portability and Accountability Act of 1996)

Includes a privacy rule that addresses the use and disclosure of an individual’s private health information.

Human Resources Outsourcing (HRO)

Outsourcing specific HR functions or processes to a third party based on the needs of the business.

HR Analytics

The collection, analyzing, and interpretation of HR data for business improvement.

I

Itemized Deductions

The subtractions made from a taxpayer’s Adjusted Gross Income.

Income Tax Withholding

The withholdings from your employees' paychecks to cover their federal tax obligations for the year.

Invoice Factoring

A type of business financing where you sell your unpaid invoices to receive funds to improve cash flow.

Individual Tax Identification Number (ITIN)

The number issued by the IRS to individuals who do not have nor are eligible to receive a social security number.

J

Job Orientation

The initial welcome a company provides to the new hire.

Joint Employment

When an employee is employed by two or more companies who share responsibility for directing the employee’s work.

L

Limited Liability Company (LLC)

One of several types of business structures, it combines a corporation's limited liability feature reducing the risk of an owner being held personally responsible for a company's debts and financial responsibilities — with the flow-through taxation that is used with a sole proprietorship.

Long-Term Disability Insurance

An insurance coverage option with a longer waiting period designed to provide disability benefits over a long period of time for more serious illnesses or injuries.

Leave of Absence

Authorized time away from work, generally requested during special life circumstances like childbirth, adoption, serious medical conditions, and more.

Learning Management System (LMS)

A software or technology used to plan, implement and assess a specific learning program.

M

Minimum Wage

The lowest wage amount that covered employees can legally be paid which can vary by jurisdiction.

N

Net Income

This is the amount of profit generated by a company after all expenses are accounted for.

Net Pay

The total amount an employee is paid after all applicable deductions.

Non-Exempt Employee

An employee who is entitled to minimum wage and overtime pay protections under the FLSA and state-specific protections; typically paid on an hourly basis.

O

Open Door Policy

A workplace standard that empowers employees to communicate job-related topics or issues with leaders or immediate supervisors.

Overhead Costs

The expenses associated with simply having functioning business.

Occupational Safety and Health Act (OSHA)

The act designed to provide a workplace for employees that is free from serious safety hazards.

Overtime Rule

The previous ruling associated with overtime pay and the legal obligation of a company to adhere to it under the FLSA.

Overtime Pay

Under the FLSA, the overtime pay rate is one and one-half times an employee’s regular rate for every hour worked beyond 40 hours in one workweek.

Owner’s Draw

A payment method where a business owner to withdraw money from their business for personal use.

Owners Distribution

Much like an Owner’s Draw, this is the term used for cash distributions made to owners of a corporation.

On-Demand Pay

Also known as instant pay, allows staff to access income as they earn it typically for a flat, per-transaction fee.

P

Part-Time Employees

Employees work a reduced schedule, typically less than 35-40 hours per week.

Profit & Loss Statement (P&L)

A financial statement that businesses use to outline income and expenses over a specific period.

Payroll Service

A third party, like Paychex, that can simplify and complete payroll functions or processes based on the needs of a business.

Payroll Outsourcing

An external processor to complete payroll processes on behalf of the business.

Pay Period

The regularly scheduled time when workers earn wages that will be paid to them on their next paycheck.

Payroll Tax Withholding

The federal income tax employers generally must withhold from employees' wages.

Payroll Calendar

The specific schedule companies adhere to that assists with budgeting and maintaining wage payment laws and regulations.

PEO (Professional Employer Organization)

A company that supports another business with certain HR administrative tasks such as administering benefits, processing payroll and tax reporting, helping maintain compliance, and improving workplace safety.

Paid Time Off (PTO)

An employer-provided benefit where an employee has access to an amount of time off that is paid and may be used for personal reasons, vacation, or sickness.

Pre-Employment Background Check

The screening of a candidate’s record done after an offer of employment has been made.

Q

Quiet Quitting

The act of an unmotivated employee doing the bare minimum amount of work required to keep their job.

Quiet Firing

The eventual resignation of an employee due to management’s intentional creation of a poor work environment.

Quarterly Taxes

Sometimes known as estimated taxes, these are tax payments made every quarter to the IRS for federal withholding.

Qualified Small Employer Health Reimbursement Arrangement (QSEHRA)

A flexible plan that allows employers to reimburse employees for individual health insurance premiums and other medical expenses.

R

Retirement Plan

An employer provided benefit that allows participants to contribute a portion of their paycheck to a retirement savings account.

Roth IRA

Allows individual investors to save for retirement on an after-tax basis, up to certain contribution limits set by the IRS.

Recruiting

A strategy used for sourcing, attracting, and engaging qualified candidates to fill open positions within a business.

S

Sabbatical Leave

An extended period away from work granted to an employee for study, travel, or personal growth.

Short Term Disability Insurance

An insurance coverage option designed to provide partial income replacement to employees who are temporarily unbale to work due to a non-work-related injury or illness.

Severance Pay

Pay and benefits sometimes offered to employees who leave the company through no fault of their own.

Semi-Monthly Pay

The pay period in which employees are paid twice monthly.

Simple IRA

An employer-sponsored retirement savings plan for businesses with 100 or fewer employees which requires employer contributions but offers simplified administration.

Section 125

Employees can receive certain benefits on a pre-tax basis that can be used for certain group health insurance premiums, out-of-pocket medical expenses, and daycare.

Safe Harbor 401(k)

Allows an employer to be exempted from certain annual nondiscrimination testing that is required with a traditional 401(k) plan if the employer provides, among other things, contributions to employees' accounts that are fully vested, or have accelerated vesting, when made.

Social Security Number (SSN)

The unique identifier assigned to all American citizens and certain non-citizens.

State Unemployment Insurance (SUI)

A mandatory federal-state program to fund unemployment compensation.

State Unemployment Tax Act (SUTA)

The state-level tax paid by employers to fund unemployment compensation.

T

Tax Write Off

Any business deduction allowed by the IRS for the purpose of lowering taxable income.

Tax Deductions

Any amount reduced from one’s taxable income, generally reducing the amount of tax the individual may have to pay.

Tax Withholding

The amount of federal income tax withheld from your paycheck.

Traditional IRA

Allows individual investors to save for retirement on a pre-tax basis, up to certain contribution limits set by the IRS.

Timecard

A physical or virtual card used to track an employee’s hours worked.

Tax Exempt

Income, revenue, or transactions that are free from tax at the federal, state, or local level.

Tip Credit

Unless prohibited by state or local law, allows an employer to credit a portion of an employee's tips toward the employer's obligation to pay minimum wage.

U

Unlimited PTO

A Paid Time Off policy that allows employees to take as much time off as they need—when they need it—as long as it doesn't interfere with their work.

Umbrella Insurance

An extra layer of liability protection that covers costs beyond the limits of your existing business liability policies.

V

Voluntary Time Off (VTO)

An employee benefit that allows workers to take paid time off to volunteer.

Voluntary Life Insurance

An optional life insurance policy that pays benefits to an employee’s beneficiaries upon their death.

Vision Insurance

A typically voluntary benefits plan offered by some employers to help cover optometrist visits, glasses, contact lenses, and qualified over-the-counter vision care expenses.

W

Workplace Safety

The measures and practices a business sets in place to help protect employees from injuries, illnesses and hazards in the workplace.

W-4 Form

The Employee's Withholding Certificate is an IRS form comprised of the withholding certificate, worksheets, withholding tables, and instructions, used to inform the employer how much federal income tax should be withheld from the employee's paycheck.

W-2 Form

The Wage and Tax Statement form is an annual information return provided to an employee that lists taxable wages, income tax withholding, and withholding of Social Security and Medicare taxes.

W-9 Form

The Request for Taxpayer Identification Number and Certification is an IRS form completed by an independent contractor or nonemployee to confirm their personally identifiable information.

Workers’ Compensation Insurance

A type of insurance that provides financial benefits to an employee who is injured or suffers an illness as a direct result of their job.

Work Opportunity Tax Credit (WOTC)

A program that allows businesses to take advantage of a tax credit when they hire workers from specific groups.

Y

Yearly Income

The total amount of income one makes within a year.

#

401(k) Plan

An employer provided employee benefit that allows participants to contribute a portion of their paycheck to a retirement savings account.

401(k) Contribution Limit

The maximum amount of money one can put towards their 401(k) account within 1 year.

Form I-9

The federally required employment eligibility verification form which establishes both an employee’s identity and whether they are eligible to work in the U.S.

1095-C Form

The Employer-Provided Health Insurance Coverage form reports information about the type of health insurance offered to applicable employees in the previous year.

1095-A Form

The Health Insurance Marketplace Statement is for those who didn't have access to or chose not to take part in an employer-sponsored health insurance plan and instead went through the Health Insurance Marketplace in the previous year.

1095-B Form

A tax form used to report certain information to the IRS and to individuals who are covered by the minimum essential coverage required by the Affordable Care Act.

11099-NEC

An annual information return listing the compensation made to a nonemployee during the calendar year.

4-Day Work Week

An alternative working arrangement where employees work only four days per week often at the same full-time pay rate.

Glossary of Terms and Definitions: Payroll, Insurance, HR and More

A

Accrual Accounting

An accounting method that recordsth revenues as they are fully earned and expenses as they occur.

Related Article: Cash vs. Accrual Accounting

<br>

Attribution Rate

The rate at which a company’s employees resign, retire, or leave and are not replaced.

Related Article: What is Attrition Rate?

<br>

Affordable Care Act Reporting (ACA Reporting)

Businesses subject to ACA and Applicable Large Employer and Self-Funded Plan requirements are mandated to submit all proper forms by their expected due dates in order to remain in ACA compliance.

Related Article: How to Manage ACA Reporting?

<br>

Arrears

Refers to the practice of compensating a service provider after the terms of the agreement have been met or that a business is behind on payments.

Related Article: What Does it Mean to Pay in Arrears?

<br>

Applicant Tracking System (ATS)

A software system used to collect, store, and analyze candidate information, filter applicants, and streamline the recruiting process.

Related Article: What is ATS?

<br>

Absence Management

The policies and procedures businesses develop to manage employee absenteeism in accordance with federal and state leave laws.

Related Article: What is Absence Management?

<br>

At-Will Employment

A working relationship where either the employer or the employee has the right to terminate employment at any time, with or without cause, and with or without warning.

Related Article: What is At-Will Employment?

<br>

Affordable Care Act (ACA)

The 2010 healthcare reform law designed to make healthcare more affordable and accessible to more people.

Related Article: What is the ACA?

<br>

Accountant

A financial professional that can record and prepare finances, conduct audits, and more.

Related Article: Accountant Resources

<br>

Annual Income

The amount one earns in a year.

Related Article: How to Calculate Your Total Annual Income

<br>

Administrative Services Organization (ASO)

An organizational model where specific HR tasks are outsourced to a third party without any “co-employment” arrangements.

Related Article: What is an ASO?

<br>

American Rescue Plan Act

Signed in 2021, this is a relief package aimed at helping businesses hit hardest during the COVID-19 pandemic.

Related Article: Tax Reporting Requirements Under American Rescue Plan Act

<br>

Accrual

The accumulation or increase of something over time, especially payments or revenue.

Related Article: What is Accrual Accounting

<br>

Automatic Gratuity

Classified by the IRS as revenue for the business and the dollars distributed to staff as non-tip wages.

Related Article: Understanding Service Charge vs Gratuity

<br>

Asset Depreciation

The decrease in the value of an asset over time.

Related Article: What is Asset Depreciation?

<br>

Accounts Receivable

Money or balance owed to a company from a customer.

Related Article: Understanding Accounts Receivable in Financial Statements

<br>

AI-Assisted Recruiting

Software solutions powered by artificial intelligence that optimize various stages of the hiring process.

Related Article: How AI is Used in Recruitment

<br>

Automated Clearinghouse (ACH)

Used to move money between bank accounts.

<br>

Adjusted Gross Income (AGI)

Total income from all sources minus certain adjustments listed on Schedule 1 of Form 1040.

Related Article: What is ACH?

B

Business Insurance

Also referred to as commercial insurance, it is insurance coverage that provides financial protection to businesses who experiences an unforeseen loss that can range from small to large scale.

Related Article: What is Business Insurance?