Payroll Accounting - Computing Wages and Salaries

Vocabulary flashcards reviewing key payroll accounting definitions, FLSA coverage rules, exempt classifications, timekeeping technology, and wage calculation concepts.

Enterprise Coverage

A basis of FLSA coverage that includes all employees of a business if at least $2$ employees work in or produce goods for interstate commerce and the business has annual gross sales of at least $500,000$, as well as many nonprofits.

Individual Employee Coverage

A basis of FLSA coverage for workers in fringe occupations closely related and directly essential to the production of goods for interstate commerce, requiring FLSA wage compliance even if the employer does not meet enterprise coverage.

Economic Reality Test

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

Statutory Nonemployees

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

Domestic Help Rules

FLSA minimum wage requirements for cooks, caretakers, gardeners, chauffeurs, and non-casual babysitters who work $8$ hours or more per workweek or earn at least $2,600$ from an employer in a calendar year.

Regular Rate of Pay

The hourly rate including all remuneration—such as commissions, nondiscretionary bonuses, severance pay, on-call pay, and shift differentials—used to calculate overtime, while excluding discretionary bonuses and gifts.

Discretionary Bonus

A bonus that is not agreed upon or promised in advance, which is excluded from an employee's regular rate of pay when computing overtime.

Training Wage

A subminimum wage rate of $4.25$ per hour allowed 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 wages aligned with local living costs.

Tipped Employee

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

Tip Credit

An employer allowance of up to $5.12$ per hour against the $7.25$ minimum wage, requiring employers to pay tipped employees a direct cash wage of at least $2.13$ per hour.

Workweek

A fixed and regularly recurring period of $7$ consecutive 24-hour periods, totaling $168$ hours, established by corporate policy.

Compensatory Time Off

Time off granted to public sector workers in lieu of overtime pay, capped at $480$ hours ($320 \times 1.5$) for public safety/emergency/seasonal personnel and $240$ hours ($160 \times 1.5$) for other public employees.

Exempt Employees

Workers exempt from FLSA minimum wage and overtime requirements, who must be paid on a salary basis of at least $684$ per week.

Indications of Exempt Status

The FLSA summary criteria detailing exempt positions—Executive, Administrative, Professional, Business Owner, Highly Compensated, Computer Professionals, Creative Professional, and Outside Salespeople—and their specific duties.

Equal Pay Act

An amendment to the FLSA requiring equal pay for men and women performing equal work, prohibiting gender-based wage differentials unless based on seniority, merit, or production quantity/quality.

Principal Activities

Work activities requiring exertion that are performed for the employer's benefit, including workstation preparation, travel during the workday, rest periods of $20$ minutes or less, and required training.

Portal-to-Portal Act

Federal legislation specifying that preliminary and postliminary activities, such as plant check-in/check-out, are noncompensable unless required by custom or contract.

Biometrics Time System

A timekeeping clock system that reads an employee's unique fingerprint or hand geometry to verify identity and collect attendance data.

Interactive Voice Response (IVR)

A telephone-based timekeeping system enabling employees to log work hours using a telephone, cell phone, or smartphone app.

Fluctuating Workweek Method

An overtime calculation method for salaried nonexempt employees with variable hours, paying a fixed salary plus an additional $0.5$ overtime premium for hours worked over $40$.

BELO Plan

A wage plan for employees with highly irregular schedules, guaranteeing compensation for up to $60$ hours based on an agreed rate plus a $50\%$ overtime rate.

Piece-Rate System

A pay scheme where workers are compensated according to their individual production output, subject to FLSA minimum wage and overtime rules.

Nondiscretionary Bonus

A promised bonus or performance incentive known in advance that must be added to total earnings before computing regular hourly pay and overtime rates.

Profit-Sharing Plan

A plan in which employees receive a share of corporate profits distributed as cash, retirement account contributions, or company stock.