Below are descriptions to common payroll questions
Gross wages are the total worker earnings before any taxes, benefits or other payroll deductions are withheld from their wages.
A pre-tax deduction is money subtracted from an employee's gross wages before taxes are withheld from their paycheck, thus reducing the overall tax burden on the employee.
Common pre-tax deductions include:
401(k)
Medical benefits
Group term life insurance
A post-tax deduction is money subtracted from an employee's gross wages after taxes are withheld from their paycheck. A post-tax deduction does not reduce the tax burden on the employee.
Common post-tax deductions include:
Roth IRA
Union dues
Wage garnishments
Employer contributions are any financial contributions to an employer sponsored plan, such as health insurance or 401(k), made by the employer. Employer contributions do not impact overall gross wages.
Reimbursements allow employers to repay employees for out of pocket expenses, and are often included on payroll. Reimbursements are non-taxable.
Both employees and employers are required to pay taxes on earnings. Both the IRS and tax agencies require specific tax withholdings, including unemployment and income tax. See below for specific tax types by employee and employer.
Employee taxes
Federal income tax
Social security
Medicare
State income tax (when applicable)
And more (when applicable)
Employer taxes
Social security
Medicare
Federal Unemployment
State Unemployment
And more (when applicable)
Net wages are the employee take home pay, after all taxes and deductions have been taken out.
Gross wages - Employee taxes - Employee deductions = Net Pay
Every payroll processed has some sort of payroll cost associated with it, which is an employer cost.
Gross wages + Employer taxes + Employer contributions + Reimbursements = Total Payroll Cost
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