Payroll glossary

Pay period

The recurring window of time covered by a single paycheck. A weekly pay period is seven days; a biweekly pay period is fourteen.

Pay frequency

How often paychecks are issued. The four U.S. options are weekly, biweekly, semimonthly, and monthly.

Payday

The calendar day on which wages from a completed pay period are deposited or distributed.

In arrears

A pay schedule where wages for a completed period are paid on a payday that falls after the period ends — the U.S. norm.

Biweekly

A 14-day pay cycle producing 26 paychecks per year. Two months per year contain three paydays.

Semimonthly

A pay cycle that lands on two fixed calendar dates per month, producing exactly 24 paychecks per year.

Gross pay

Total earnings before any tax withholding or pre-tax deductions are subtracted.

Net pay

The amount actually deposited or distributed after all withholdings and deductions — also called take-home pay.

FICA

The Federal Insurance Contributions Act tax that funds Social Security (6.2%) and Medicare (1.45%) — 7.65% combined for the employee share.

Form W-4

The IRS form an employee submits to set federal income tax withholding. Updated for 2020 to remove allowances.

Form W-2

The annual wage and tax statement employers issue to each employee by January 31, summarizing prior-year earnings and withholding.

Form 1099-NEC

The IRS form used to report payments to non-employee contractors. Contractors are not on payroll cycles.

Direct deposit

Electronic transfer of net pay from the employer's payroll account into the employee's bank account, typically via ACH.

Pay card

A reloadable prepaid debit card used as an alternative to direct deposit for employees without traditional bank accounts.

ACH

Automated Clearing House — the U.S. interbank network used for direct-deposit payroll transfers, processed in batches.

Payroll cutoff

The deadline by which timecards, expense reimbursements, and adjustments must reach the payroll team to be included in the upcoming check.

Lookback period

The IRS-defined window used to determine an employer's federal tax-deposit schedule (monthly vs. semiweekly).

Pay stub

The itemized record (paper or digital) showing gross pay, deductions, taxes, and net pay for a single pay period.

Overtime

Wages paid at 1.5× the regular rate for hours worked over 40 in a workweek by non-exempt employees, per FLSA.

FLSA

The Fair Labor Standards Act — federal law setting minimum wage, overtime, and recordkeeping standards.

Exempt employee

A salaried employee meeting FLSA tests for executive, administrative, or professional exemption — not entitled to overtime.

Non-exempt employee

An employee entitled to FLSA overtime protections — typically hourly, paid time-and-a-half over 40 hours.

Salary

A fixed annual compensation amount paid in equal installments per the employer's pay frequency.

Hourly rate

Compensation expressed as dollars per hour worked, multiplied by hours per pay period to determine gross pay.

Pre-tax deduction

A payroll deduction (401(k), HSA, certain insurance premiums) subtracted from gross pay before income tax is calculated.

Post-tax deduction

A payroll deduction (Roth 401(k), garnishments, union dues) subtracted after income tax is calculated.

401(k)

An employer-sponsored retirement savings plan funded by pre-tax (or Roth) payroll contributions, often with employer matching.

PTO accrual

The mechanism by which paid time off is earned — typically a fixed number of hours added to the employee's balance per pay period.

Shift differential

Additional pay for working evening, overnight, weekend, or holiday shifts — usually a percentage premium on the base rate.

Retroactive pay

A correction issued in a later paycheck to compensate for underpayment in a prior pay period.

Final paycheck

The last wages owed to a departing employee. Most states require payment within a defined window after termination.

Wage garnishment

A court-ordered deduction from an employee's paycheck to satisfy a debt, child support, or tax lien.