Find definitions for acronyms commonly used in payroll processing.


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A

ABA
The American Banker's Association is an organization that represents banks on issues of national importance for financial institutions and their customers.

ACH
Automated Clearing House is a national agent that transfers funds between financial institutions and other third-party vendors. The ACH enables companies to transfer direct deposit funds from their corporate accounts to employee accounts.

AEIC
Advance Earned Income Credit is the acronym for an advance version of the Earned Income Credit. Under certain circumstances, employees may be able to get part of their Earned Income Credit in advance in their payroll checks.

APA
The American Payroll Association is an industry association representing the issues of payroll professionals. The APA also lobbies government agencies and alerts members of new tax laws.

ASCII
American Standard Code for Information Interchange is a code for presenting files in English through a text viewer - used commonly for payroll import/export files.

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B

BDI
Benefits to Deduction Interface is a function to adjust payroll deductions to reflect changes to employee benefits.

BPO
Business Process Outsourcing is defined as the long-term contracting out of non-core business processes such as payroll processing to an outside provider to help achieve increased shareholder value.

BRD
Business Requirements Document is a document that defines the customer's payroll processing implementation requirements.

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C

CEU
Continuing Education Units are credits awarded for a continuing education class or course taken in order to retain a payroll certification.

COBRA
The acronym COBRA refers to the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended. COBRA was enacted in order to provide a continuation of medical coverage for certain employees and their dependents, under group health plans maintained by their employers.

CPP
A Certified Payroll Professional is someone who passed a comprehensive payroll exam offered by the American Payroll Association.

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D

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E

EIN
The Employer Identification Number is used to identify corporations, partnerships, nonprofit associations, trusts, and similar non-individual entities and must be shown on tax returns and depository forms used by the employer.

EDI
Electronic Data Interchange is the transfer of structured data, between companies and computer systems, according to set standards.

EFT
Commonly called direct deposit, Electronic Funds Transfer enables the transfer of all or part of an employee's payroll check directly to their checking or savings account.

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F

FEIN
A Federal Employer Identification Number is the government-assigned tax number under which a business unit files taxes and reports as an employer.

FICA
The taxes imposed under the Federal Insurance Contributions Act fund social security and Medicare. The employer is required to match the 6.2% social security tax rate imposed on the employee's first $97,500 of taxable wages as well as the 1.45% Medicare tax rate imposed on all of the employee's taxable wages. No credits or withholding exemptions are permitted for the calculation of FICA taxes. When there is more than one employer, each must withhold FICA tax from the employee up to the taxable wage base.

FIPS Code
Federal Information Process Standard Code identifies the county and/or locality of child support order. It is used for transmitting payments through EFT or EDI. This alphanumeric, 5 or 7-position field is normally included on the child support withholding notice that is issued to begin the payroll withholding procedure.

FLSA
The Fair Labor Standards Act (FLSA) establishes minimum wage, overtime pay, recordkeeping, and child labor standards affecting full-time and part-time workers in the private sector and in Federal, State, and local governments. Covered nonexempt workers are entitled to a minimum wage of not less than $5.25 an hour. Overtime pay at a rate of not less than one and one-half times their regular rates of pay is required after 40 hours of work in a workweek.

FMLA
The Family and Medical Leave Act of 1993 entitles employees to take reasonable leave for medical reasons, for the birth or adoption of a child, and for the care of a child, spouse, or parent who has a serious health condition.

An employee taking family or medical leave is entitled to reinstatement to the position of employment held when the leave began or to an equivalent position with equivalent employment benefits, pay, and other terms and conditions of employment.

Covered employers are those with fifty or more employees each workday during each of twenty or more calendar workweeks in the current or preceding calendar year. Eligible employees are those who have been employed by a covered employer for at least twelve months. Reasonable leave is defined as twelve work weeks in a twelve-month period. Leave need not be paid but medical coverage under any group health plan must be maintained during the leave.

Form SS-4
Form SS-4 is an Application for Employer Identification Number. The purpose of Form SS-4 is for an employer to apply for an employer identification number (EIN). An EIN is a nine-digit number assigned to sole proprietors, corporations, partnerships, estates, trusts, and other entities for tax filing and reporting purposes. You must file Form SS-4 if you have not obtained an EIN before and you have a payroll of one or more employees. Additional conditions may apply to the requirements for an EIN.

Form W-2
Employers must file Form W-2 for each employee from whom income, social security, or Medicare taxes have been withheld from the employee's payroll.

FTE
Full-Time Equivalency is a measurement that expresses part-time labor as a percentage of similar full-time positions. It is particularly useful for clarifying job-sharing arrangements.

FUTA
The Federal Unemployment Tax Act, together with state unemployment systems, provides benefits to workers during brief periods of unemployment. No employee contributions are required. Employers pay 6.2% of the employee's first $7,000 of taxable wages. Employers are, however, entitled to a credit against their FUTA liability for contributions to state funds.

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G

GL
General Ledger is a record of business transactions, organized by account number. It summarizes all expenses incurred and all income received during an accounting month. The payroll information generated by a payroll system is typically the last component to go into the general ledger. Payroll expenses such as wages, taxes, and deductions must be posted to the general ledger in order for the company to create and distribute its financial reports, such as profit and loss statements, balance sheets, and accounts receivable reports. Posting payroll data is therefore critical to a company's business, and must be timely and accurate.

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H

HRCI The Human Resource Certification Institute (HRCI) is the leading independent, internationally recognized certifying body for the HR profession. HRCI certifications require professionals to demonstrate their expertise in the core principles of HR practice and the application of those principles. HRCI's three core certifications meet the needs of nearly every HR professional.

HRO
Human Resource Outsourcing is the practice of complete end-to-end HR administration outsourcing. A third party becomes the payroll, HR, and benefits department for a company and provides all the people, process expertise and technology that frees a company to focus on their core competency.

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I

IRCA
The Immigration Reform and Control Act of 1986 (IRCA) prohibits employers from knowingly hiring illegal aliens by requiring the verification of an applicant's identity and eligibility for employment prior to hiring. Documents that will satisfy both the employment authorization and identity requirements of the law include a US passport, a certificate of US citizenship, a certificate of naturalization, or a resident alien card or other alien registration card that contains a photograph. A record of each employment eligibility verification must be maintained on Form I-9 (Employment Eligibility Verification).

IRA
The simplest of all retirement plans is the individual retirement account (IRA). An IRA is a tax-favored savings plan that allows eligible participants to make pre-tax contributions through payroll deduction and defer taxation on earnings until retirement. An employer can make IRA contributions for all or select employees. In such instances, the recipient's reported annual taxable salary will include the IRA contribution, although this amount would then be deducted (conditions permitting) by the employee on his or her year-end tax filing.

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J

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K

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L

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M

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N

NACHA
NACHA is the acronym for the Electronic Payments Association, formerly the National Automated Clearing House Association. This organization develops electronic solutions to improve the ACH payment system in the United States. NACHA develops operating rules and business practices for the Automated Clearing House (ACH) Network and for electronic payments in the areas of Internet commerce, electronic bill and invoice presentment and payment (EBPP, EIPP), e-checks, financial electronic data interchange (EDI), international payments, and electronic benefit transfer (EBT).

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O

OBC
Official Bank Checks are guaranteed to be funded by the issuing bank.

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P

PDO
Paid Day Off refers to a pool of time an employee earns which he or she can use for vacation or sick leave. Generally tracked and paid through payroll cycles.

PRWORA
Enacted in 1997, the Personal Responsibility and Work Opportunity Reconciliation Act requires employers to report very specific information about every new hire within 7 days. The law is designed to reduce overpayments of unemployment and workers' compensation and food stamps, as well as to aid in the recovery of child support payments from non-custodial parents through payroll reporting and wage attachments.

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Q

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R

RCH
Recertification Credit Hours are units of continuing education used to maintain or renew certification, a designation earned by a person to certify that he is qualified to perform a job. A payroll services provider may provide training that qualifies for recertification credit hours for professional certifications with the American Payroll Association (APA) and/or Human Resource Certification Institute (HRCI).

RFP/RFI
A Request for Proposal/Request for Information is a document from a potential payroll services customer outlining specifications and requirements for a payroll system they want to purchase. Used to prepare a sales proposal.

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S

SaaS
Software as a Service (SaaS) is a payroll and human resource service application delivery model where a human resource and payroll services vendor develops a web-native software application and hosts and operates (either independently or through a third-party) the application for use by its customers over the Internet. Customers do not pay for owning the software itself but rather for using it. They use it through an API accessible over the Web and often written using Web Services or REST. The term SaaS has become the industry preferred term, generally replacing the earlier terms Application Service Provider (ASP) and On-Demand.

SIC
Standard Industry Classification is an IRS code used to classify establishments by their primary type of actitivy.

SIT
State Income Tax is an employee payroll withholding tax based on amount, frequency of payment, number of exemptions, and filing status.

SME
SME is an acronym for Subject Matter Expert, a person considered the most appropriate or informed resource for a given topic.

SSA
The Social Security Act was passed in 1935. Social Security provides retirement benefits for most persons employed or self-employed for a set period of time (currently 40 quarters; about 10 years). Benefits paid at retirement, traditionally age 65, are based on a person's earnings history. Payments may begin at age 62 at a reduced rate or, if delayed until age 70, at an increased rate. For a person with earnings equal to the U.S. average, the benefit will be about 40 percent of pay. For someone with maximum earnings, the benefit would be about 25 percent of the portion of pay subject to Social Security tax.

SSN
In the United States, a Social Security number (SSN) is a 9-digit number issued to citizens, permanent residents, and temporary (working) residents. The number is issued to an individual by the Social Security Administration. Its primary purpose is to track individuals for payroll, banking and taxation purposes.

SOW
In conjunction with the terms of a payroll services agreement or contract, a Statement of Work explains the work that will be completed on a client's account, the timeframe and the deliverables that should be expected.

SSL
The SSL (Secure Socket Layer) security protocol provides data encryption, server authentication, message integrity, and optional client authentication for a TCP/IP connection. SSL comes in 40-bit strength and 128-bit strength. This refers to the length of the "session key" generated by every encrypted transaction. The longer the key, the more difficult it is to break the encryption code. Software with encryption features having key lengths over 40 bits is considered strong encryption by the United States government for export purposes. Most browsers support 40-bit SSL sessions, and the latest browsers enable users to encrypt transactions in 128-bit sessions. 128-bit sessions are several times harder to break than 40-bit messages.

STAWRS
The Simplified Tax and Wage Reporting System is a program started during the early 1900s as a partnership among government agencies and the business community in an effort to simplify the employment tax and payroll reporting process.

SUI
State Unemployment Insurance State-administered programs that provide financial protection for workers during periods of joblessness. Employers wholly finance plans, except in Alaska, New Jersey, New York, Pennsylvania, Puerto Rico, and Rhode Island where employees must make small contributions.

SUTA
The acronym for the State Unemployment Tax Act. See SUI for more information.

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T

TPO
Total Payroll Outsourcing is a service where all functions of a company's payroll are handled by an outside vendor. This is similar to business process outsourcing (BPO) and total benefits outsourcing (TBO).

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U

UC
Unemployment Compensation is a joint federal state program to provide temporary and partial wage replacement to involuntarily unemployed workers who were recently employed. Unemployment compensation can also help stabilize the economy during recessions. The U.S. Department of Labor oversees the system, but each State administers its own program.

URL
The Uniform Resource Locator is the Internet/Intranet address for a document, file, or other resource. It describes the protocol required to access the resource, the host (server) where it can be found, and a path (file directory) to the resource on that host.

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V

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W

W-2
Employers required to file a Form 941 must inform employees on their payroll how much has been withheld from the employees' wages for federal and state income taxes and FICA taxes. This reporting is done by supplying each employee with a Form W-2, Wage and Tax Statement, by January 31 of the month following the reporting year. Employees who were terminated before the end of the year may request the Form W-2 earlier, and the form must be furnished within 30 days of the request. Copies of the Forms W-2 must be filed with the Social Security Administration by the end of February.

W-4
A newly hired employee must complete a Form W-4, notifying the employer how many withholding allowances to use when deducting federal income taxes from the employee's payroll check. The more withholding exemptions an employee claims, the less taxes an employer will have to withhold. Employees may claim fewer exemptions than they are entitled to in an effort to reduce later tax obligations. Employees may also ask employers to take additional money from their wages in anticipation of a larger tax bill. The IRS provides Publication 505, Tax Withholding and Estimated Tax, and Publication 919, How Do I Adjust My Withholding, to help employees complete the form.

WCOMP
Workers Compensation insurance is a legal requirement to provide medical care or cash payment to cover health services for workers injured on the job. This includes partial wage-replacement benefits and rehabilitation services to restore workers to their fullest economic capacity. These benefits are totally employer-financed.

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X

XML
Extensible Markup Language forms the rules and guidelines that allow various types of file formats (such as worksheets and database files) to produce files that are easy to generate and read on various platforms, such as PC and Macintosh systems.

XSL
Extensible Stylesheet Language describes the rules and guidelines that control the manner in which some web pages are displayed.

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Y

YTD
"Year to date," often shortened to the acronym YTD, is a term used to express the results of an activity in the time between today's date and the beginning of either the calendar or fiscal year.

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Z

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