Glossary of Terms for the PEO Industry
1099 – Form 1099 is a form promulgated by the Internal Revenue Service (IRS) and is used in the United States income tax system to prepare and file an information return to report various types of income other than wages, salaries, and tips (for which Social Security Administration Form W-2 is used instead). The term information return is used in contrast to the term tax return although the latter term is sometimes used colloquially to describe both kinds of returns.
A4 – Arizona Revised Statutes (ARS) §43-401 requires your employer to withhold Arizona income tax from your compensation paid for services performed in Arizona for application toward your Arizona income tax liability. Arizona withholding is a percentage of the amount of federal income tax withheld.
ACH – The ACH Network is a highly reliable and efficient nationwide batch-oriented electronic funds transfer system governed by the NACHA OPERATING RULES which provide for the interbank clearing of electronic payments for participating depository financial institutions. The Federal Reserve and Electronic Payments Network act as ACH Operators, central clearing facilities through which financial institutions transmit or receive ACH entries.
Administrative Employer – The Employer of Record in a co-employment relationship, usually a PEO, and the Employer responsible for the administrative tasks of HR and compliance, tax payments, payroll processing and other employee administrative tasks.
Certified Payroll – Usually required in government projects, this payroll report is signed and certifies that the wages and hours were actually worked on that particular job, location, etc.
COBRA – The Consolidated Omnibus Budget Reconciliation Act (COBRA) gives workers and their families who lose their health benefits the right to choose to continue group health benefits provided by their group health plan for limited periods of time under certain circumstances such as voluntary or involuntary job loss, reduction in the hours worked, transition between jobs, death, divorce, and other life events. Qualified individuals may be required to pay the entire premium for coverage up to 102 percent of the cost to the plan.
Compensation – Something (such as money) given or received as payment or reparation (as for a service or loss or injury)
Constructive Discharge – Occurs when an employer makes the conditions of work so intolerable that the employee “quits.” For example, the employer might want the employee to leave, without actually saying “you’re fired.”
Constructive Knowledge – Knowledge which may be found to have existed because the regulation, notice, fact, or directive at issue was of so notorious a nature, or was so conspicuously posted or distributed, that the particular accused ought to have known of its existence. Knowledge is constructive when it is shown that the accused would in the ordinary course of events, or by the exercise of ordinary care, have secured knowledge of the order, notice, fact, etc.
Covered Employee – Any employee that is working for a Client Company that uses a PEO (Professional Employer Organization), and is therefore co-employed by both parties under the contract.
Davis Bacon Act – United States federal law requiring the payment of prevailing wages on public works projects. All federal government construction contracts, and most contracts for federally assisted construction over $2,000, must include provisions for paying on-site workers no less than the locally prevailing wages and benefits paid on similar projects.
DHS – The United States Department of Homeland Security (DHS), commonly known in the United States as Homeland Security, is a Cabinet department of the federal government of the United States with the responsibility of protecting the territory of the United States from terrorist attacks and responding to natural disasters.
DOL – The U.S. Department of Labor – The Department of Labor fosters and promotes the welfare of the job seekers, wage earners, and retirees of the United States by improving their working conditions, advancing their opportunities for profitable employment, protecting their retirement and health care benefits, helping employers find workers, strengthening free collective bargaining, and tracking changes in employment, prices, and other national economic measurements. In carrying out this mission, the Department administers a variety of Federal labor laws including those that guarantee workers’ rights to safe and healthful working conditions; a minimum hourly wage and overtime pay; freedom from employment discrimination; unemployment insurance; and other income support.
EEOC – The Equal Employment Opportunity Commission, or EEOC, is a United States federal agency tasked with ending employment discrimination in the United States. Signed into law by President John F. Kennedy by Executive Order 10925, it can bring suit on behalf of alleged victims of discrimination against private employers. It also serves as an adjudicatory for claims of discrimination brought against federal agencies.
Emod – Stands for “experience modifier”, and is a rate modifier used by the NCCI (National Council for Compensation Insurance) to define the risk of a particular employer. Each company/entity has its own Emod, and this Emod is determined based on the previous three years of loss experience on a company’s workers compensation policy.
EPA – The Environmental Protection Agency (EPA or sometimes USEPA) is an agency of the federal government of the United States charged with protecting human health and with safeguarding the natural environment: air, water, and land.
EPLI – Employers Practices Liability Insurance – Insurance purchased by an employer to protect itself against errors in employer practices, both willful and accidental.
ERISA – The Employee Retirement Income Security Act of 1974 (ERISA) is a federal law that sets minimum standards for most voluntarily established pension and health plans in private industry to provide protection for individuals in these plans.
FICA – The Federal Insurance Contributions Act (FICA) tax is a United States payroll (or employment) tax imposed by the federal government on both employees and employers to fund Social Security and Medicare—federal programs that provide benefits for retirees, the disabled, and children of deceased workers. Social Security benefits include old-age, survivors, and disability insurance (OASDI); Medicare provides medical insurance benefits.
FLSA – The Fair Labor Standards Act (FLSA) establishes minimum wage, overtime pay, recordkeeping, and child labor standards affecting full-time and part-time workers in the private sector and in Federal, State, and local governments. Covered nonexempt workers are entitled to a minimum wage of not less than $5.85 per hour effective July 24, 2007; $6.55 per hour effective July 24, 2008; and $7.25 per hour effective July 24, 2009. Overtime pay at a rate of not less than one and one-half times their regular rates of pay is required after 40 hours of work in a workweek.
FMLA – Covered employers must grant an eligible employee up to a total of 12 workweeks of unpaid leave during any 12-month period for one or more of the following reasons: for the birth and care of the newborn child of the employee; for placement with the employee of a son or daughter for adoption or foster care; to care for an immediate family member (spouse, child, or parent) with a serious health condition; or to take medical leave when the employee is unable to work because of a serious health condition.
FUTA – The Federal Unemployment Tax Act (FUTA), authorizes the Internal Revenue Service to collect a federal employer tax used to fund state workforce agencies. Employers pay this tax annually by filing IRS Form 940. FUTA covers the costs of administering the UI and Job Service programs in all states. In addition, FUTA pays one-half of the cost of extended unemployment benefits (during periods of high unemployment) and provides for a fund from which states may borrow, if necessary, to pay benefits.
Grievance – An allegation that something imposes an illegal obligation or denies some legal right or causes injustice.
Gross Wages – The total amount of compensation prior to taxes and other payroll deductions being taken out.
HIPAA – The Health Insurance Portability and Accountability Act (HIPAA) was enacted by the U.S. Congress in 1996. According to the Centers for Medicare and Medicaid Services (CMS) website, Title I of HIPAA protects health insurance coverage for workers and their families when they change or lose their jobs. Title II of HIPAA, the Administrative Simplification (AS) provisions, requires the establishment of national standards for electronic health care transactions and national identifiers for providers, health insurance plans, and employers. The AS provisions also address the security and privacy of health data. The standards are meant to improve the efficiency and effectiveness of the nation’s health care system by encouraging the widespread use of electronic data interchange in the US health care system.
HMO – A health maintenance organization (HMO) is a type of managed care organization (MCO) that provides a form of health care coverage in the United States that is fulfilled through hospitals, doctors, and other providers with which the HMO has a contract.
I9 – An I-9 Form is the Employment Eligibility Verification Form required by the Immigration and Naturalization Services (INS) to verify your identity and your eligibility to work. All employees must complete this form and provide valid original identifications. You are not eligible for pay until Payroll Services receives a satisfactory I-9.
ICE – Immigration and Customs Enforcement (ICE) is the largest and primary investigative arm of the United States Department of Homeland Security (DHS) and is responsible for identifying, investigating, and dismantling vulnerabilities regarding the nation’s border, economic, transportation, and infrastructure security. ICE, headquartered in Washington, D.C. is charged with the investigation and enforcement of over 400 federal statutes within the United States and maintains attaches at major U.S. embassies overseas. Consequently, ICE Special Agents possess the broadest investigative authority within the United States Government.
Incentive Compensation – compensation that is linked to performance by rewarding employees for actual results achieved instead of seniority or hours worked.
INS – The United States Immigration and Naturalization Service (INS) was a part of the United States Department of Justice and handled legal and illegal immigration and naturalization. It ceased to exist on March 1, 2003. Most of its functions were transferred to three new agencies within the newly-created Department of Homeland Security in March 2003. The administration of immigration services, including permanent residence, naturalization, asylum, and other functions became the responsibility of the Bureau of Citizenship and Immigration Services (BCIS), which existed only for a short time before changing to its current name, U.S. Citizenship and Immigration Services (USCIS). The investigative and enforcement functions (including investigations, deportation, and intelligence) were combined with U.S. Customs investigators, the Federal Protective Service, and the Federal Air Marshal Service, to create U.S. Immigration and Customs Enforcement (ICE). The border functions of the INS, which included the Border Patrol along with INS Inspectors, were combined with U.S. Customs Inspectors into the newly created U.S. Customs and Border Protection (CBP).
IRS – The Internal Revenue Service (IRS) is the United States federal government agency that collects taxes and enforces the internal revenue laws.
MEDICARE – The Centers for Medicare & Medicaid Services (CMS) administers Medicare, the nation’s largest health insurance program, which covers nearly 40 million Americans. Medicare is a Health Insurance Program for people 65 years of age and older, some disabled people under 65 years of age, and people with End-Stage Renal Disease (permanent kidney failure treated with dialysis or a transplant).
NACHA – NACHA-The Electronic Payments Association, formerly the National Automated Clearing House Association, is an organization that develops electronic solutions to improve the ACH payment system in the United States. NACHA represents more than 11,000 financial institutions through direct memberships and a network of regional payments associations, and 585 organizations through its industry councils. NACHA develops operating rules and business practices for the Automated Clearing House (ACH) Network and for electronic payments in the areas of Internet commerce, electronic bill and invoice presentment and payment (EBPP, EIPP), e-checks, financial electronic data interchange (EDI), international payments, and electronic benefit transfer (EBT).
NCCI – The National Council on Compensation Insurance (NCCI) is a U.S. insurance rating and data collection bureau specializing in workers’ compensation. Operating with a not-for-profit philosophy and owned by its member insurers, NCCI annually collects data covering more than four million workers compensation claims and two million policies.
Net Wages – The amount of compensation after taxes and other payroll deductions are taken out.
Open Enrollment – The time period, usually once a year, when employees can elect to add, delete or change coverages with no questions or qualifying events. Rates generally change at this point.
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OSHA – The United States Occupational Safety and Health Administration (OSHA) is an agency of the United States Department of Labor. It was created by Congress under the Occupational Safety and Health Act, signed by President Richard M. Nixon, on December 29, 1970. Its mission is to prevent work-related injuries, illnesses, and deaths by issuing and enforcing rules (called standards) for workplace safety and health.
Overtime – Is the hours worked per week in excess of the time worked in the normally scheduled workweek.
Pay Cycle – The accrued period for pay, such as biweekly, weekly or semi-monthly.
Pay Day – The day on which you receive pay for your work.
PPO – In health insurance, a preferred provider organization (or “PPO”, sometimes referred to as a participating provider organization) is a managed care organization of medical doctors, hospitals, and other health care providers who have covenanted with an insurer or a third-party administrator to provide health care at reduced rates to the insurer’s or administrator’s clients.
Prevailing Wage – The hourly wage, usual benefits and overtime, paid in the largest city in each county to the majority of workers, laborers, and mechanics. Prevailing wages are established by the Department of Labor and Industries for each trade and occupation employed in the performance of public work. They are established separately for each county and are reflective of local wage conditions.
PTO – Paid Time Off – A paid-time-off policy combines vacation and sick leave into one policy.
Qualifying Event – A qualifying event is a change in an employee’s personal life that may impact their eligibility or dependent’s eligibility for benefits.
Sexual Harassment – Sexual harassment is harassment or unwelcome attention of a sexual nature. It includes a range of behavior from mild transgressions and annoyances to serious abuses, which can even involve forced sexual activity.
Short Rate Penalty – A financial penalty against an employer who cancels an insurance policy prior to the set termination date of that policy. This is usually seen in workers compensation policies.
SHRM – Society for Human Resource Management – The Society for Human Resource Management (SHRM) is the world’s largest professional association devoted to human resource management. SHRM’s mission is to serve the needs of HR professionals by providing the most current and comprehensive resources, and to advance the profession by promoting HR’s essential, strategic role. Founded in 1948, SHRM represents more than 225,000 individual members in over 125 countries, and has a network of more than 575 affiliated chapters in the United States, as well as offices in China and India.
Social Security – Social Security in the United States is a social insurance program funded through dedicated payroll taxes called Federal Insurance Contributions Act (FICA). Tax deposits are formally entrusted to Federal Old-Age and Survivors Insurance Trust Fund, or Federal Disability Insurance Trust Fund, Federal Hospital Insurance Trust Fund or the Federal Supplementary Medical Insurance Trust Fund. The main part of the program is sometimes abbreviated OASDI (Old Age, Survivors, and Disability Insurance) or RSDI (Retirement, Survivors, and Disability Insurance).
SUTA – State Unemployment Tax Authority
Time Clock – A clock used to record the hours that employees work.
Timesheet – A document or entry program used to record actual labor time against an order or project, that may also specify the operation, location and category or type of task being performed.
Union – An organization formed by workers for bargaining collectively with their employers to obtain more pay and better working conditions.
W2 – Form W-2, Wage and Tax Statement, is used in the United States income tax system as an information return to report wages paid to employees and the taxes withheld from them. The form is also used to report FICA taxes to the Social Security Administration. Relevant amounts on Form W-2 are reported by the Social Security Administration to the Internal Revenue Service.
W9 – Form W-9, Request for Taxpayer Identification Number and Certification, is used in the United States income tax system by a third party who must file an information return with the IRS. It requests the taxpayer identification information of a taxpayer (usually in the form of a Social Security Number or Tax Identification Number).
Wage – Compensation paid to employees.
Workers’ Compensation Insurance – Workers’ compensation (colloquially known as workers’ comp in North American English or compo in Australia) provides insurance to cover medical care and compensation for employees who are injured in the course of employment, in exchange for mandatory relinquishment of the employee’s right to sue his or her employer for the tort of negligence. The tradeoff between assured, limited coverage and lack of recourse outside the workers compensation system is known as “the compensation bargain”. While plans differ between jurisdictions, provision can be made for weekly payments in place of wages (functioning in this case as a form of disability insurance), compensation for economic loss (past and future), reimbursement or payment of medical and like expenses (functioning in this case as a form of health insurance), and benefits payable to the dependents of workers killed during employment (functioning in this case as a form of life insurance). General damages for pain and suffering, and punitive damages for employer negligence, are generally not available in worker compensation plans.
Worksite Employer – The Employer who directs the day-to-day activities of a Covered Employee, primarily the Client Company in a co-employment relationship.
Wrongful Termination – When an employee is discharged without a proven cause, that employee has the right to sue the employer for damages such as loss of wage and “fringe” benefits, and under certain circumstances, for punitive damages. To do this, the employee must have had a specific or implied contract indicating that the employment would be permanent and that the discharge was in contradiction of public policy.
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