Payroll Glossary

Deduction

A deduction is an amount subtracted from an employee's gross pay to reach net pay, or an amount allowed to taxpayers as an offset against income.

Deemed Substantiation

Deemed substantiation methods include per diems and the standard business mileage rate, and are safe-harbor methods employers may use in place of the substantiation rules for expenses incurred under an accountable reimbursement plan.

Deferred Compensation

This is the postponement of a wage payment and is generally used to describe a portion of wages that an employee sets aside for retirement, usually on a pretax basis.

Defined Benefit Plan

This is a retirement plan that uses a formula based on an employee's salary and length of service to compute the employee's retirement benefits, and is not funded by employee contributions to the plan.

Defined Contribution Plan

This is a retirement plan with benefits determined by the amount in an employee's account at the time of retirement. The account may be funded by contributions from both the employer and the employee.

Direct Deposit

The electronic transfer of an employee's net pay directly into financial institution accounts designated by the employee is called direct deposit.

Discretionary Bonus

A bonus paid for services performed is a discretionary bonus, provided the bonus is not paid in advance.

Disposable Earnings

Disposable earnings are the portion of earnings that remains after deductions required by law have been made. Disposable earnings are used to calculate the maximum amount of an employee's wages subject to a garnishment, attachment, or child support withholding order.