Eligible Payroll Law and Legal Definition

Eligible payroll is calculation that may be used to determine the total amount of salaries / wages of employees who, though eligible, do not receive a salary increase. It also may refer to a funding requirement, as under an employer's employee benefit plan.

For example, an employer may contribute to its profit sharing plan up to a certain percentage of “eligible payroll.” For purposes of this rule, the term “eligible payroll” means wages paid to participants in the plan, less any amounts deferred into a 401(k) or Section 125 (“Cafeteria”) plan. The law alsol allows employer profit sharing contributions of up to a certain percentage of “gross” eligible payroll (i.e., wages paid to participants, unreduced for 401(k) or Section 125 deferrals.