Payroll Glossary

Safe Harbor

A safe-harbor method is an IRS-approved alternative method (usually a short-cut) for complying with IRS rules, regulations, and procedures.

Salary Reduction Agreement

This is an agreement that allows eligible employees to elect to reduce their compensation or forego an increase in compensation in order to have that amount contributed directly to a qualified retirement or other benefit plan.

Self-Employment Tax

This is a tax imposed under the Self-Employment Tax Act on the income of those who work for themselves, so that they can build up Social Security and disability benefits other workers acquire through FICA taxes on their wages.

Semi-Annual

Semiannual refers to something occurring twice per year or once every six months.

Semi-Monthly

Semimonthly refers to something occurring twice per month, and is a type of payroll period.

Severance Pay

This is a payment made by an employer to terminated employees (usually those who are terminated through no fault of their own), and is designed to tide them over until new employment is secured.

Shift Differential

This is extra pay received by employees for working a less-than-desirable shift.

Sick Pay

Sick pay refers to replacement wages paid to an employee who cannot work because of an illness or injury that is not work-related.

Simplified Employment Pension

SEPs are IRAs to which employers can make contributions beyond the IRA limits. These contributions must be made under a written allocation formula that meets participation, nondiscrimination, and other requirements.

Social Security Act

The Social Security Act is the federal law that established the old-age, survivors, and disability insurance (OASDI) programs commonly referred to as "Social Security". The programs are financed by the OASDI portion of FICA.

Statement of Cash Flow

This is a financial statement that shows the sources and uses of cash during the accounting period.

Statement to Correct Information

Form 941c is used to make adjustments and corrections to Form 941 when taxes have been underwithheld or overwithheld. This form explains the nature of the adjustment and shows the erroneous and corrected amounts of tax withheld.

Statutory Employees

These are special groups of employees whose wages are not subject to FITW but are subject to FICA and FUTA. These employees include agent- or commission-drivers, certain homeworkers, full-time life insurance salespeople, and full-time traveling or city salespeople.

Subsidiary Ledger

Summarized entries are posted from subsidiary ledgers directly to the general ledger. Subsidiary ledgers replace journals and arose with the computerization of most companies' accounting systems.

Substantiation

Substantiation refers to the requirement that employees keep records (including receipts) of the amount, time, place, and business purpose of expenses to be reimbursed by the employer.

Supplemental Wages

Supplemental wages refer to compensation paid in addition to an employee's regular wages, such as bonuses, commissions, and overtime pay. Special withholding rules apply to supplemental wages.