Payroll Glossary

Cafeteria Plan

A flexible benefit plan (or "flex plan") allows employees to select benefits or level of coverage from a menu of benefits offered by an employer. Employees may choose the benefits they want to receive. A cafeteria plan is a flex plan that satisfies the requirements of Section 125 of the Internal Revenue Code (IRC). These requirements include limited participation, offering both taxable and qualified benefits, no deferral of compensation, and no discrimination in favor of highly compensated employees. Only certain benefits are eligible for inclusion under a cafeteria plan, including medical reimbursement benefits, accident or health insurance, group-term life insurance, dependent care assistance benefits, and vacation days.

Cash or Deferred Arrangement

A CODA is any arrangement under which an employee may choose between making a pretax contribution to a qualified plan, such as a profit-sharing or stock-bonus plan, and receiving cash or another taxable benefit.

Casual Labor

Service not in the course of the employer's business (casual labor) includes labor that is occasional, incidental, or irregular, and that does not promote or advance an employer's trade or business. The treatment of casual labor under the various federal payroll laws depends on the amount of wages paid.

Charging Benefits

This is a method of debiting an employer's unemployment insurance account to reflect the payment of unemployment benefits to its former employee.

Chart of Accounts

This is a listing of each account by name and an identification number. The numbering scheme is designed to identify the type of account.

Circular E

Circular E is the Employer's Tax Guide, an IRS publication that provides explanations and illustrations of an employer's federal tax withholding, depositing, and reporting obligations. Circular E provides information relevant to all employers, while the Employer's Supplemental Tax Guide is intended to provide additional information required by larger employers.


The Consolidated Omnibus Budget Reconciliation Act of 1985 guarantees an employee's right to a limited period of continued employer-provided health insurance following termination.


Commission is a percentage of sales paid to an employee.

Common Paymaster

When an employee works for two or more employers, each employer must pay FICA on wages paid to that employee up to the taxable wage limit, but when two or more related corporations concurrently employ the same individual and pay that individual through a common paymaster, FICA may be figured as though the individual had only one employer - the common paymaster. The wages paid by each corporation are combined for the purposes of the taxable wage limit and FICA is paid based on the combined wages. It must be emphasized that employment must be concurrent. The common paymaster rule no longer applies if the employee leaves one employer to work full time for another. The common paymaster is, therefore, any member of the group of corporations that pays wages to an employee of the related corporations. The common paymaster is responsible for keeping books and payroll records and for filing information and tax returns.

Common-Law Test

This is a test that measures the level of control an employer is authorized to exercise over a worker. The common-law test is used to determine if a company exercises sufficient control over a worker to establish an employer/employee relationship with its attendant tax obligations.


Compensation refers to all cash and noncash remunerations given to an employee for services performed for the employer.

Constructive Receipt

Constructive receipt is the doctrine under which wages are considered paid when the employee has access to them, not when they are earned (i.e., when the work has been performed). Payroll tax liability is generally incurred upon constructive receipt of wages.

Consumer Price Index

The CPI is a standard measure of domestic price inflation and is produced monthly by the Bureau of Labor Statistics (BLS). The CPI is used by employers to figure cost-of-living adjustments in collectively bargained contracts, and by the IRS and other government agencies to index various contribution and benefit limits.

Control Employees

Certain highly compensated or key employees whose access to some benefits is restricted or denied are called control employees.

Cumulative Bulletin

The CB is an annual IRS publication that contains all the information printed in the weekly Internal Revenue Bulletin (IRB).