The Top Payroll Questions Your Employees Will Ask You

As a business owner, HR director or office manager, you are bound to get asked question after question about your companies policies and payroll practices.  Click each topic below to see the important questions an employee will ask you and how you can answer them.

What is the difference between gross and net income?

Gross income is the total amount of money you made for a given period before any deductions are made to your pay.  Net income is the final amount of money you take home in each period after deductions and withholdings such as taxes paid, health insurance premiums, dental insurance premiums, retirement contributions, etc. 

For example:  An employee makes $10 per hour and works 40 hours.  Their gross income would be $400.  Their net income might be $300 because they paid $80 in taxes and $20 towards their retirement. 

How much paid time off do I currently have?

This is extremely important to your employees and your policies around this should be outlined in a company handbook and paid time off balances should be tracked carefully and frequently.  PTO balances can be a combination of vacation time, sick time, family sick time, and personal leave.  Many payroll software companies now have this tracked online and clients that work with Paper Trails have access to their PTO balances on their pay stubs and in the online employee self-service portal.

What should I claim on my W4? 

This will vary depending on each employee and their amount of jobs and dependents.  There are worksheets provided by the IRS that will help you determine this.  As as simple rule, if an employee would like to reduce the amount of taxes taken from each paycheck and have a larger tax liability at year end, they should increase the number of dependents on the W4.  Conversely, if they want to increase the amount taken from each paycheck and have less of a tax liability at year end, then they should reduce the number of dependents on the W4.  

What is exactly coming out of my paycheck?

There are many things coming out of an employees paycheck.  Federal income tax, social security and Medicare taxes, state and local taxes where applicable, health insurance premiums, retirement plan contributions, and any extra amounts that you want to have withheld for taxes are the main things coming out of an employees check.  In some instances, you and your employee may have additional money being taken from their paycheck for things such as rent, cell phones, etc.

What are pretax deductions?

Pre-tax deductions are just that, deductions made from employees’ income before withholding any taxes. This lowers the employee’s taxable income, which can save them from having to pay more money in taxes than they otherwise would. Some pre-tax deductions include retirement plans, health insurance and health savings accounts, short term or long term disability, life insurance, commuter benefits, etc .

What is the difference between overtime and holiday pay?

Overtime pay is required by law and is a minimum of 1.5 times the hourly rate paid to an employee for any hours worked over 40 hours in a week.  For example, an employee makes $10 per hour and works 50 hours in a week.  Their pay would be $10 per hour for 40 hours ($400) and $15 per hour for 10 hours ($150) for a total of $550.

Holiday pay is not required by law but is up to each individual business.  Some employers agree to pay their employees a higher amount on holidays or pay their employees for holidays that they do not require their employees to work.  If an employee is paid for a holiday that they do not actually work, but the holiday puts their total hours over 40 hours in a week, the employee is not entitled to overtime pay for those extra hours.

When do I get paid if payday falls on a holiday?

There is no correct answer for this question.  Moving the payday up a day before the holiday or back a day after the holiday is up to the business and their HR departments efficiency.  It is standard practice, however, to pay your employees a day before the holiday.

What is an employer contribution?

An employer contribution is the amount an employer pays or contributes to an employee’s retirement fund, health insurance, or amount of social security and Medicare taxes that the employer pays on the employees behalf.

How do I make a change to my personal information?

Oftentimes, an employee needs to make a change to some of their personal information, like to update their address, direct deposit information, or what they claim on their W4.  This can be done on the online employee self-service for Paper Trails clients or if a web portal is used by the company.  If not, employees should contact their HR Director or Office Manager for assistance in filling out the correct paperwork.

When is my W2 available?

Generating and distributing W2’s will depend on your company and your payroll process.  W2’s are required by the IRS to be provided to employees no later than January 31st.  Most companies provide W2’s to their employees much earlier than his deadline however.