Here are some Payroll Terms you should get used to as an Employers

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Here are some Payroll Terms you should get used to as an Employers

Not everyone doing business actually went to business school. Likewise, not every employer of labour actually knows a lot about employment and labour management.

A lot of people go to school to study , but might not be chanced in the end to work with their degrees. This happens in most countries, particularly West African ones, like Nigeria.

Now, as an employer, there are some basic terminologies you must be aware of and also know how they are being applied.

Since many employers became so as a result of unmentioned circumstances, it will be of good use to know these terminologies.

If you are an employer without prior training in the employment or employee management , then this article was written specifically for you.

You should take your time to read it. When you know and apply these terminologies as they should be applied, there will be smooth running of the business, and I can assure you there will be just little to no glitches during your Management tenure.

For this article, I will be showing to you, and at the same time explaining some payroll terminologies you must know as an employer. It is a must in order to ensure the continuous progress of your Enterprise.

You should know what a payroll is by now, even if you plan on doing your own payroll or not.


Everything to be discussed in this article will center around this topic, “Payroll”.

Payroll had several definitions. It is left to you to choose which of the numerous definitions suits you best.

Some people say Payroll is a record of the total earnings of all employees for a company in a year. Personally, I agree with this definition but only to an extent.

It is somewhat incomplete, therefore I will give you another definition which I fully support.

Payroll is a financial record of employees’ salaries, deductions, bonuses and other items on employee checks.

You can also say Payroll is the distribution of paychecks to employees each payday. These two definitions are what I fully support, speaking from my own perspective.

Subsequently, I will be showing you the major Payroll terms every employer needs to know. This is going to be an interesting ride,

as you’ll be learning new things you probably have not heard of before. This is not to over hype the content, but you will definitely love it when you apply your knowledge of these terms. Let us move on.


Amongst all the definitions available for what Gross Pay is, I will be showing you only one.

This one is the most accepted definition of gross pay. I believe it is widely accepted because the context is easy to comprehend or understand.

Gross Pay is the total amount of money you get before specified deductions are made on your wage or salary.

Without explaining further, you should understand what I mean. I wrote “Specified deductions” because every deduction on an employee’s salary should have a reason.

Take for example, the deduction might be for tax purposes or overdraft which might have been collected by the employee.

When an employer makes a deduction on an employee’s wage or salary, he should clearly state why the deduction was made.

For better understanding, let us see this common example. Mr A earns $3,000 per month. Tax Obligations sum up to $50 per month.

If Mr A’s Employer decides to deduct the tax from the salary, Mr A will be given a total sum of $2,950 as take home. The initial $3,000 is Mr A’s Gross Pay.


Net Pay is the amount of an employee’s paycheck left over after deductions have been made on it.

No, still using the previous example of Mr A. Since his gross pay was $3,000 per month, and only tax deduction was made on the gross pay which summed up to $50, His net pay will be a total of $2,950.


The act of Employers deducting taxes from employees salaries and paying directly to the government is known as WithHolding.

Many companies use this methods to pay taxes and I still see it as the best way to reduce the burden of taxes on the employees.

A worker whose tax isn’t withheld or deducted from his salary might find it really hard to pay the tax to the government. This might result to the unpaid taxes being piled up and causing indebtedness to the government in the end.


A work week simply interpretes as 168 consecutive hours of work in a seven day period.

This in turn, equals 24 hours of work daily. This is considered as a work week and it is a major terminology when designing and writing a Payroll.


Every employee, at the point of appointment have been informed on the amount of time he or she is to work to receive their pay in full.

Now, there are some workers who might work more than this amount of time due to specified reasons.

These set of employees are paid a bonus known as overtime. In essence, overtime is a calculated amount that is usually paid to employees who work more than their individual designated work time.


An Independent Contractor is an individual who is self employed but has been hired by an employer to render a specific service to his business or company.

They are called independent because they do not work with the terms and conditions of employment given to the employees of the company.

Many businesses employ independent contractors. Examples of independent contractors are Plumbers, Bricklayers, Electricians, External Auditors etc. When money is paid to these set of people, it is clearly stated in the Payroll as “Money paid to Independent Contractors”.


Everyone has a liability. Companies and business mes are not excluded. Liabilities can be seen as burden at times.

Liability is your legal responsibility, risk or obligation. Payment of Taxes can be a liability. Purchasing fuel for the company’s car is also a liability.