Payroll Deduction

A payroll deduction is an amount of money that is withheld from an employee's paycheck by their employer. These deductions are typically taken out of an employee's gross pay, which is their total earnings before taxes and other deductions are applied.

Types of Payroll Deductions

• Taxes - Federal, state, and local taxes are withheld from an employee's paycheck, including income tax, Social Security tax, and Medicare tax.
• Benefits - Some benefits, such as health insurance premiums or retirement plan contributions, may be deducted from an employee's paycheck.
• Wage garnishments - If an employee has a court-ordered wage garnishment for things like child support or back taxes, their employer must deduct the specified amount from their paycheck.
• Voluntary deductions - Employees may choose to have voluntary deductions taken out of their paycheck, such as contributions to a 401(k) plan or charitable donations.

Employers must be sure that they are correctly calculating and withholding the appropriate amounts from employees' paychecks because the payroll deduction procedure can be complicated. This makes it easier to guarantee that employees receive the proper compensation and benefits and that the employer complies with all relevant laws and regulations.