As a small business owner, you’re wearing many hats—and sometimes that includes navigating the complex world of HR and payroll. Whether you’re hiring your first employee or simply trying to keep everything compliant, understanding key human resources (HR) and payroll terms is crucial. But let’s face it: HR and payroll language can often feel like a maze of jargon.
That’s where we come in. Below, we’ve compiled a master list of HR and payroll terms to help you confidently navigate these waters. From acronyms you’ve heard but never quite understood to technical terms that sound more complex than they are, this guide will help you break it all down.
Affordable Care Act (ACA)
A comprehensive healthcare reform law enacted in 2010 that aims to increase small businesses’ access to quality, affordable health insurance. The ACA includes various measures to help small employers(generally those with fewer than 50 full-time employees and full-time equivalents) lower their premium cost growth,
Americans With Disabilities Act (ADA)
This U.S. statute prohibits discrimination based on mental or physical disability. It requires employers to provide reasonable accommodations for employees with disabilities in workplaces.
Attrition
This refers to the gradual reduction of an organization’s workforce due to employees leaving for any reason, whether voluntary or involuntary, including resignation, termination, death, or retirement.
Background check
Also referred to as pre-employment screening; is a process in which employers verify an applicant’s identity, criminal history, education, employment, and other personal information, such as date of birth and Social Security number.
Bonus
A financial reward given to employees in addition to their regular salary, often tied to performance, company profits, or specific milestones. Bonuses are subject to payroll taxes, just like regular wages.
Benefits
Non-wage compensation provided to employees over and above their salaries through programs, policies, or services. This includes paid time off health insurance, retirement plans, and other perks that contribute to employee well-being.
Career Development
This involves organizational support for employees’ professional growth through coaching, mentoring, skills training, and career pathing. It is facilitated by HR functions like learning, talent management, and recruiting.
Consolidated Omnibus Budget Reconciliation Act (COBRA)
A federal law that allows employees and their families to continue their employer-sponsored health coverage for a limited time after job loss, reduced hours, or certain other events.
Compensation
Refers to the total monetary and non-monetary payments provided to an employee in exchange for work, skills, and time. This includes salary, bonuses, benefits, stock options, and pension funds.
Compliance
Staying in line with local, state, and federal laws that govern employment and payroll practices.
Conflict Management
This entails using techniques to resolve disagreements by facilitating discussions, identifying issues, and establishing common goals. It aims to reduce discord and promote cooperation between conflicting parties.
Defined Contribution Plan
A voluntary, tax-deferred retirement plan, such as a 401(k) or 403(b), where employees contribute a portion of their earnings to an account designed to fund their retirement. Additionally, their employer may also make a matching contribution as an added benefit.
Deduction
An amount withheld from an employee’s gross pay. Deductions can be voluntary (such as health insurance premiums or retirement contributions) or involuntary (like taxes or wage garnishments).
Direct Deposit
An efficient and secure payroll method that transfers employees’ net pay directly into their bank account, eliminating the need for paper checks.
DE&I(Diversity, Equity, and Inclusion)
A subfunction within the HR function that aims to create a diverse workforce and foster a respectful, supportive environment where all employees feel valued
Employee Handbook
A document outlining a company’s policies, procedures, and employee expectations. It’s a critical tool for keeping everyone on the same page—and it helps organizations stay compliant with labor laws.
Employee Retention
It refers to organizational policies and practices aimed at encouraging employees to stay with the company long-term.
Employee Self-Service (ESS)
An HR technology that helps employees access job-related information directly through a company’s intranet or web portal.
Exempt Employee
This term refers to a category of employees defined in the Fair Labor Standards Act. It applies to employees who don’t receive overtime pay or qualify for minimum wage, often based on their job duties and salary level.
Exit interview
A survey conducted with a departing employee, typically to discuss their reasons for leaving and their experience of working for the organization.
Fair Labor Standards Act (FLSA)
A federal law that sets standards for minimum wage, overtime pay, recordkeeping, and youth employment for employees in the private sector and federal, state, and local governments.
Federal Insurance Contributions Act (FICA)
This law requires employees and employers to contribute to Social Security and Medicare through payroll taxes.
Wage Garnishment
A legal procedure where the employer withholds a portion of an employee’s wages for the payment of a debt, such as child support or unpaid taxes.
Gender Pay Gap
It refers to the average earnings difference between men and women in the workforce.
Gig Workers
Gig workers are temporary, on-demand labor, including freelancers and contractors, hired to meet business needs, access niche skills, and fill talent gaps quickly.
Gross Pay
The amount of money owed to an employee before taxes, benefits, and other payroll deductions are withheld from their wages.
HR Analytics
Also known as people analytics, it involves the collection and application of talent data to enhance critical business and workforce outcomes.
Human Resources Information System (HRIS)
A software solution for managing HR-related transactions and best practices, often extended to include recruiting, training, performance management, and employee self-service tools.
HR Outsourcing
It involves delegating HR functions and responsibilities to a third-party service provider to optimize costs and enhance operational efficiencies.
Human Resource Management
It is the practice of administering policies and programs to optimize employee performance and advance business goals,
Health Savings Account (HSA)
This account allows taxpayers with high-deductible health plans to contribute pretax dollars to cover qualified healthcare expenses not covered by their insurance.
Independent Contractor:
Also known as freelancers, independent contractors are persons or entities who provide goods or services to a business on an as-needed basis. They handle their own taxes, and businesses aren’t required to offer them benefits like health insurance or retirement contributions.
I-9 Form
A document employers use to verify the identity and employment eligibility of new hires in the U.S.
Income Tax
A federal tax levied by the IRS on the annual earnings of individuals, corporations, and other entities. It applies to all forms of earnings that make up taxable income, including wages, salaries, bonuses, investment income, and certain unearned income.
Job Description
This outlines the role summary, responsibilities, qualifications, and required soft and business skills.
Job Shadowing
A type of on-the-job training where an employee observes another employee in their role. It’s often used for onboarding new hires or as a learning opportunity for interns and students to understand job tasks and requirements.
Leave of Absence
A period of time that an employee is allowed to be away from work, either paid or unpaid, for reasons such as illness, family responsibilities, or personal matters.
Leadership Development
It encompasses a series of activities designed to equip current and future leaders with the skills and knowledge needed to excel in their roles.
Liability
In HR and payroll, this typically refers to a company’s legal obligations or debts, such as owing wages or payroll taxes.
Micromanagement
A pattern of manager behavior characterized by excessive oversight and control of employees’ work processes, coupled with minimal delegation of tasks and decision-making authority.
Minimum Wage
The minimum hourly rate an employer is legally required to pay employees, set by federal, state, or local law. The federally mandated minimum wage in the U.S. is $7.25 per hour, although it varies from state to state.
Misclassification
An employer’s act of classifying a worker incorrectly as an independent contractor instead of an employee.
Net pay
The take-home pay, which is the amount of money that an employee earns after all deductions.
Overtime
It refers to any hours worked beyond the standard 40-hour workweek. Under the FLSA, employers must pay non-exempt employees at least 1.5 times their regular rate for any hours worked over 40 a week.
Payroll Tax
Taxes withheld by employers from an employee’s wages and salary. This includes federal income tax, Social Security, Medicare, and, depending on the state, local taxes.
Performance Review
A formal evaluation where a manager assesses an employee’s past performance, identifies strengths and areas for improvement, provides constructive feedback, and articulates future expectations.
Paid Time Off (PTO)
A benefit that allows employees to take paid leave for vacations, personal days, or illness.
W-2 Form
Officially, the Wage and Tax Statement, it is an IRS tax form used in the U.S. to report wages paid to employees and the taxes withheld from them.
W-4 Form
A tax form employees fill out to indicate how much federal income tax their employer should withhold from their paychecks.
Work-Life Balance
An aspect of employee well-being related to the employee’s ability to manage personal and professional commitments with adequate time for rest and leisure.
Understanding these core terms will better equip you to manage your HR and payroll responsibilities and keep your business running smoothly.
Need help navigating the world of HR? Let Ravix’s HR consulting services simplify things for you. Schedule a call today and let our HR consultants provide the support you need to grow with confidence!
