What are payroll expenses?

Gross wages

This cost of payroll expenses refers to the payment of hourly workers. Calculating gross wages for hourly workers can be accomplished by multiplying the employees' hourly wage amount by the number of hours the employees work during a given payroll period. This also includes overtime pay, which is recorded at the rate of one and a half times the hourly wage.

Annual salaries

Annual salaries refer to yearly salaries for employees. These are figures that are paid to employees over a year's time and given out in installments that occur most often on a weekly, bi-weekly, or monthly basis. It is a fixed income that an employee earns, and is not affected by the number of hours they work.

Payroll taxes

Payroll taxes are paid by employers to fund Social Security, Medicare, and other social insurance programs. Employers are required to pay payroll taxes by federal and state governments. These taxes are based on the employer's gross payroll numbers.

Tax withholdings

Tax withholdings are related to the federal income taxes employers withhold from employees' paychecks. The amount of money withheld depends on specific employee income levels and also the information provided on their W-14 form.

Employee benefits

Many companies offer employee benefits to their workers, and when they do, they must also factor in the employer portion of the following expenses:

• Insurance plans (medical, dental, vision, life, and disability)

• Paid leave (for vacations and sick days)

• Retirement plans, pension plans, or savings plans (like 401(k)s or Roth IRAs)

• Post-retirement health insurance options and plans