Payroll withholdings definition
/What are Payroll Withholdings?
Payroll withholdings are those amounts that an employer is legally required to withhold from the gross pay of its employees. These withholdings apply to social security taxes, federal and state income taxes, garnishments, and any amounts directly authorized by employees to be deducted (such as union dues, pension premiums, and donations to charities). The employer records these withholdings in its accounting records as a liability, and then remits them to the applicable party on behalf of its employees. Each remittance payment made reduces the amount of the employer’s liability. The employer is heavily penalized if these remittances are not paid in a timely manner.
There are cases in which a withholding is actually an employee payment to the company, such as to pay back an advance; in this situation, the withholding reduces the receivable on the books of the employer.
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Net Pay
Net pay is the amount of compensation remaining after all payroll withholdings have been deducted from the gross pay of employees. This is the amount of cash that the employer pays to each employee on payday, either in cash or via a check, electronic payment, or payroll debit card.