8 Common Payroll Questions Employees Often Ask + Answers
January 11, 2024
One of the key roles of a human resource manager or personnel is answering the common payroll questions of employees. These payroll queries often have to do with their salary and the different types of adjustments applied to their hard-earned money.
The readiness to answer all payroll and salary-related inquiries is crucial because it helps foster trust and assurance between employers and employees.
Read on to learn how to address all your employees’ payroll-related dilemmas effectively.
- Employees' most common payroll questions often involve their gross and net salaries, holiday compensation, tax withholdings, and pay frequency.
- Employees also ask about the critical differences between a non-exempt and an exempt employee. A non-exempt employee is entitled to overtime pay and the minimum wage, while an exempt employee is not.
- Establishing clear work policies, creating an employee handbook, using employee portals and pay stub generators, and providing additional training for their HR and payroll personnel help answer common payroll queries efficiently.
8 Common Payroll Questions Employees Frequently Ask (With Answers)
The following are some of the most common payroll questions that employees typically ask:
#1. What is the difference between gross and net salary?
One of the most common payroll questions that concern employees involves their gross and net salaries.
Both newly hired and tenured workers typically raise this question because it has to do with their earnings, and there is also a clear difference between their gross and net salary amounts.
Gross pay refers to the total income earned by employees before taxes, health, life, and retirement plan contributions, as well as other salary adjustments, are applied to their pay.
Employees' gross salaries are determined by multiplying their hourly or regular rate by the number of work hours they have completed in a pay cycle.
In contrast, net salary is the total income of employees after taxes, and other deductions are withheld from their gross pay. Employees also receive the net amount in their bank account during payday.
#2. What is the difference between an exempt and non-exempt employee?
The difference between an exempt and non-exempt employee determines whether an employee is entitled to overtime compensation. The FLSA defines exempt employees as those who hold executive, administrative, or professional job roles or positions in a company.
Exempt employees are not paid per hour; they are paid a regular salary. They are also not qualified for a minimum wage and are exempt from overtime pay. On the other hand, they are eligible for paid time off and year-end bonuses.
Nonexempt employees tasked with manual and technical work are paid hourly, qualify for minimum wage, and are entitled to overtime compensation.
#3. How is statutory holiday pay calculated?
Statutory holiday pay is paid time off for employees during federal and regional holidays.
While holidays may mean additional time off work for some employees, this can also raise concerns about whether they still get paid depending on whether they choose to work.
There are different ways to calculate statutory holiday pay, and it all depends on whether employees work on a holiday or not:
- Daily rate X 1 = Holiday pay. Some employers do not require their employees to work on a holiday and instead encourage them to take the day off. Employers pay employees their regular daily rate to compensate for the non-working holiday.
- Daily rate X 1.5 (or X2) = Holiday pay. Sometimes, employers pay employees who work on a holiday either time-and-a-half (x1.5) or double (x2) their regular pay. Increasing holiday pay is a way for employers to incentivize employees who choose to work instead of taking the holiday off.
#4. What do withholdings on my pay stub mean?
Withholdings on pay stubs refer to the required amount or percentage taken by employers from employees’ gross earnings on the latter’s behalf.
These withholdings include federal, state, and local taxes, worker’s compensation, FICA taxes, wage garnishments, and unemployment insurance. Withholding taxes vary per employee, and the rates are based on their filing status and tax bracket.
Not all withholdings are mandatory. Some voluntary deductions apply when employees contribute to a health or retirement savings plan.
#5. When will I receive my salary if the payday is a holiday?
Salaries are typically sent on the next business day if the payday falls on a holiday. Banks are closed during holidays and weekends; hence, depositing and transferring funds into employee accounts are suspended until regular working days resume.
Alternatively, employers can process payroll earlier to ensure all salaries are paid before the holiday. At the same time, employers must require their Human Resources department and payroll personnel to take note of the different bank or regular holidays each year.
In this manner, planning and adjusting payroll processing and aligning it with the company’s pay cycle will be easier.
#6. What are Social Security and Medicare taxes?
Not all employees can define the purpose of Social Security and Medicare taxes on their paychecks. Raising this query is one of the ways for them to understand the scope of their tax obligations as regular taxpayers.
Social Security and Medicare taxes are the taxes that make up the Federal Insurance Contributions Act (FICA). FICA taxes help fund the federal government’s programs for the older population, persons with disabilities, and healthcare.
Employers and employees split the contribution for Social Security and Medicare taxes. They each contribute 6.2% for Social Security and 1.45% each for Medicare.
#7. Why does my W-2 form declare a different amount than my final pay stub?
Employees often raise this question towards the end of the calendar year, when all paperwork involving employee earnings is processed and finalized.
W-2 forms and final pay stubs declare different amounts in an employee’s total earnings because the former includes the total taxable earnings in a year.
That said, employers consider their employees’ gross earnings, annual tax taxes, and pre-tax deductions while also discounting their non-taxable income to determine the W-2 wages of each of their staff.
It is crucial that employers accurately calculate the wages declared on their employees’ W-2 forms and final pay stubs to give employees a clearer idea of their annual net income and the total amount of taxes withheld from their earnings.
#8. How frequently do I get paid?
Employees are eager to know how often they receive their salaries because it helps them budget their monthly expenses.
The frequency at which employees get paid depends on the pay period followed by their employer. Employers can choose to pay employees either weekly, bi-weekly, bi-monthly, or monthly, depending on their industry and the nature of the job assigned to their workers.
Following a weekly pay period means employees get paid four times a month at the end of each work week. When employees are paid bi-weekly, they receive their wages every other week.
Bi-monthly or semi-monthly pay periods entail disbursing employee paychecks every 1st and 15th or every 15th and 30th or 31st of the month. Meanwhile, a monthly pay period means that employees get paid once a month.
5 Best Strategies for Answering Common Payroll Questions
The following are some of the best strategies used to answer the most common payroll questions concisely and effectively:
Set Clear Company Policies
Employers must establish a clear and complete list of policies to govern compensating and incentivizing their employees.
The policies will guide determining the pay grade for each job role, evaluating how employees are granted pay increases and bonuses, and deciding the different types of benefits offered to help boost employee morale.
Company policies must also adhere to the government’s employment regulations and uphold the labor rights of employees.
Prepare an Employee Manual
Once the company’s policies are finalized, it is best to put all these regulations on paper by creating an employee manual.
Preparing a guidebook for employees saves time and energy for HR managers, mainly if the company houses over fifty staff, and entertaining their queries one by one proves too tedious and impossible to fulfill.
Employees can simply check their copy of the handbook or manual to find the necessary answers. An employee manual also comes in handy when ensuring newly hired staff areadequately oriented about the company’s rules and work culture.
Use an Employee Portal
Another efficient way to address employees' various payroll questions and answers involves using an employee portal.
An employee portal is akin to a digital version of the employee manual, enabling employees to access their previous and latest pay stubs and employment records.
Granting employees access to paychecks and employment documents highlights transparency and due diligence in ensuring their records reflect accurate and updated information.
Take Advantage of a Pay Stub or W-2 Generator
A pay stub generator is quite beneficial for processing payroll promptly and explaining questions involving employee salaries and deductions.
You can generate a pay stub to provide a visual example explaining how much taxes and contributions are deducted from employees’ salaries.
Additionally, you can use pay stub generators to teach employees how to read their pay stubs properly and clarify potential misunderstandings with their salaries.
Meanwhile, a W-2 form generator comes in handy in reducing payroll mistakes concerning calculating your employees’ taxes.
Our generator uses a template with all the required fields in your employees’ Wage and Tax Statement. It also has an ‘Auto Calculate’ feature to ensure accuracy in reporting your employees’ annual wages and withheld taxes.
Train Human Resource and Payroll Personnel
Provide additional training whenever needed to ensure your HR and payroll managers and staff are well-equipped to handle common payroll questions and more in-depth queries that employees may have regarding their employment and earnings.
For instance, the IRS constantly updates its existing rules regarding matters such as which forms to use in reporting employee earnings and taxes. Staying up-to-date with tax and labor-related news is a must to remain compliant with federal regulations.
The readiness to answer general payroll questions from both new and tenured employees shows reliability on the part of the employers.
Understandably, some of the most common payroll questions are repetitive. But, with patience, open communication, and carefully drafted work policies, employers can meet their employees halfway and exercise transparency at all times.