Payroll Glossary

Back-Pay Award

This is a cash award granted to an employee generally to remedy a violation of the minimum wage or overtime provisions of the Fair Labor Standards Act or of such federal employment discrimination laws as the Age Discrimination in Employment Act, the Americans with Disabilities Act, and the Civil Rights Act. The payroll tax rules depend on who must pay the award and whether the award includes amounts for penalties, punitive damages, and legal fees.

Backup Withholding

Backup withholding is a method used to ensure the payment of income tax on certain nonwage payments when the payee fails to provide a taxpayer identification number (TIN) on an information return, or when the IRS notifies the payor that the payee's TIN is incorrect.

Balance Sheet

The balance sheet is a financial statement that presents a business's financial position in terms of its assets, liabilities, and owner's equity as of a certain date (generally the end of the company's fiscal year, but may be issued quarterly as well).

Base Period

This is a 12-month period used to determine against which employer a particular state unemployment insurance claim is to be charged. In most states, the base period consists of the first four of the last five quarters immediately before a claimant's benefit year begins.

Base-Period Wages

These are wages earned during the base period, which are often used to determine the eligibility for and amount of state unemployment insurance benefits.

Benefit Ratio

State unemployment taxes (premiums) are paid according to the amount of benefits charged against an employer's account by its former employees (risk factor). Thus, low employee turnover generally leads to a low tax (premium) rate and high turnover generally means a higher tax rate. In benefit ratio states, the relationship between benefits charged against an employer's account and its taxable payroll is measured. Thus the employer's account is charged with benefits paid to each worker or former worker. At the end of the year, benefits charged are divided by the employer's taxable payroll to compute the benefit ratio, and the employer's tax rate is set by checking the benefit ratio against the state's rate schedules. Generally, the higher the ratio, the higher the tax rate.

Benefit Wage Ratio

Under a benefit wage ratio plan, wages paid to a worker during the base period are used to determine the employer's tax rate. When a worker gets unemployment benefits, base-period wages (or benefit wages) are charged to all of the worker's base-period employers. The state computes the employer's rate by dividing the benefit wages charged against the employer during the relevant period by the employer's total taxable payroll for that period. The resulting benefit wage ratio is then used to determine the employer's actual tax rate.

Benefit Year

This is usually the 52-week period beginning with the first day a valid claim for unemployment insurance benefits is filed.

Bi-weekly

Biweekly means occurring once every two weeks. A biweekly payroll period can be used in the percentage method or the wage-bracket method of withholding.

Bureau of Labor Statistics

The BLS is the division of the U.S. Department of Commerce that is responsible for developing the Consumer Price Index (CPI) and other statistical series.