Anything an employee receives for work performed must be reported on a tax return as gross income. This includes money, services, goods or property, unemployment compensation and some scholarships, but not welfare benefits or non-taxable Social Security benefits. Employees earn compensation for different types of activities, depending on the time, location, and type of work performed.
When employees complete a time card or other time tracking system to report work completed, the system usually requires an earning type to be specified. Typically hourly earning types requires the category of employee to be specified, such as regular, temporary, or student intern. Supplemental or excess payments describe temporary extra compensation, stipends, or holiday pay. Overtime pay usually specify shifts, job type, job location, and time of day, such as weekend hours or after normal business hours. Other earning types may depend on the industry. For example, some businesses pay employees to be on standby or available to work on short-term notice.
Successful small business owners use these defined employment categories to track and monitor payroll spending more effectively. Analyzing their payroll expenditures can identify areas that need improvement. For example, excessive overtime may indicate a need to hire additional full-time employees. An excess of holiday hours worked with few sales may indicate too many employees are scheduled to work at times when staffing is unnecessary.
Payroll systems define different earning types to ensure that the business runs smoothly and efficiently. Successful business owners document these policies and procedures and communicate them through newsletters and training sessions to ensure that all employees follow the guidelines consistently. This helps employees get paid on time, which usually results in high employee morale and job satisfaction.