Payroll Accounting Chapter 2 - Vocabulary Flashcards

Vocabulary flashcards covering core terms, definitions, and concepts from Chapter 2 of Payroll Accounting 2024 Edition.

Enterprise Coverage

A basis of FLSA coverage that includes all employees of a business if at least two employees work in interstate commerce or produce goods for interstate commerce, and the business has at least $500,000$ of annual gross sales.

Individual Employee Coverage

A basis of FLSA coverage applying to an individual employee in a fringe occupation closely related and directly essential to the production of goods for interstate commerce, even if the business does not meet enterprise coverage.

Economic Reality Test

A six-factor test used to determine employee status under the FLSA, evaluating employer control, relationship permanency, work means/instrumentalities, required skill/initiative, profit/loss risk, and degree of integration.

Statutory Nonemployees

Direct sellers and licensed real estate agents who are treated as self-employed rather than employees for federal tax purposes.

Nondiscretionary Bonus

An earned bonus that is promised or known in advance, which must be included in the employee's regular rate of pay for overtime calculation purposes.

Discretionary Bonus

A bonus paid to an employee that was not agreed upon or promised beforehand, which is excluded from the regular rate of pay.

Training Wage

A reduced minimum wage of $4.25$ per hour allowed under the FLSA for the first consecutive $90$ days of employment for newly hired employees under $20$ years of age.

Living Wage

Local city ordinances requiring employers doing business with local government to pay wage rates adjusted to local cost of living.

Tipped Employee

An employee who customarily and regularly receives more than $30$ per month in tips.

Tip Credit

An allowance ($5.12$ per hour under federal law) that an employer can claim against the minimum wage ($7.25$ per hour) when paying a tipped employee who receives at least $2.13$ per hour in direct wages.

Workweek

A fixed, regularly recurring period established by corporate policy consisting of seven consecutive 24-hour periods, totaling $168$ hours.

Compensatory Time Off

Paid time off granted to public sector employees in lieu of monetary overtime pay, capped at $480$ hours for public safety, emergency response, and seasonal workers, or $240$ hours for other public workers.

Exempt Employees

Workers exempt from FLSA minimum wage and overtime provisions, typically white-collar employees paid on a salary basis of at least $684$ per week meeting specific executive, administrative, professional, or related duties tests.

Indications of Exempt Status

A classification summary detailing specific job duty and compensation criteria for Executive, Administrative, Professional, Business Owner, Highly Compensated, Computer Professionals, Creative Professional, and Outside Salespeople under FLSA.

Nonexempt Employees

Employees covered by FLSA minimum wage and overtime regulations, including manual/blue-collar workers, who must be paid overtime for hours worked over $40$ in a workweek.

Equal Pay Act

An amendment to the FLSA requiring that men and women performing equal work in the same establishment receive equal pay, prohibiting sex-based wage discrimination.

Principal Activities

Work tasks requiring exertion performed by an employee primarily for the employer's benefit, including workstation prep, travel on duty, wait time, rest periods of $20$ minutes or less, and required training.

Preliminary and Postliminary Activities

Tasks performed before or after an employee's principal workday activities (such as checking in or out at a plant) that are noncompensable unless required by contract or custom.

Portal-to-Portal Act

Federal legislation that defines noncompensable preliminary and postliminary activities performed before or after an employee's principal workday activities.

Overtime Premium Approach

A method of computing gross pay where total hours worked are multiplied by the regular hourly rate, plus an additional overtime premium calculated as hours over $40$ multiplied by $0.5$ times the regular rate.

Fluctuating Workweek Method

A pay arrangement where a nonexempt employee with irregular hours receives a fixed salary for all hours worked in a week, plus an extra $0.5$ overtime premium for all hours worked over $40$.

BELO Plan

A specialized compensation agreement under the FLSA for employees with highly irregular work schedules, providing guaranteed compensation for up to $60$ hours based on a fixed rate plus overtime.

Piece-Rate System

A compensation plan in which employees are paid a fixed rate for each unit produced or inspected, with total earnings required to meet minimum wage and overtime requirements.

Special Incentive Plans

Modified piece-rate plans that offer tiered or increasing pay rates for higher volume brackets of production to encourage higher productivity.

Commission

Compensation calculated as a stated percentage of revenue or transactions paid for sales transactions or amounts earned in excess of a quota.

Profit-Sharing Plans

Compensation arrangements in which employees share in corporate profits, receiving their share in cash, retirement account contributions, or stock distributions.