What is a pay code?

Each pay code is unique so that it can be organized within the payroll system. This is the most effective way to track different forms of pay and compensation a company gives its employees. Here is a closer look at some of these common pay codes:

• Regular pay

This pay code is used for an employee's standard form of pay whether it is an hourly wage or annual salary.

• Overtime pay

This type of pay code is used for any compensation provided to an employee for working overtime hours. This type of compensation can also be referred to as premium pay.

• Bonus pay

There are also pay codes for employees' bonus pay, which is additional pay given to an employee for a reason determined by the employer. Bonus pay codes may also correspond with incentive compensation pay codes, depending on the particular company.

• Deductions

This pay code is used to categorize any amounts of money that are withheld from an employee's wages or salary for tax, benefits, or other deduction purposes.

• Reimbursement pay

A pay code is also necessary for reimbursement pay at certain companies. This pay code applies to compensation employees receive for expenses the employee paid for, like the expenses that come with traveling for work (transportation, meals, lodging, etc.). It can also apply to any equipment purchased by an employee that the company is willing to reimburse.