Today's computer-generated paycheck stubs are often filled with a lot of cryptic codes, some of which make sense only to your employer's accountants. Typical of these is the code "EE," which may appear in multiple places on your pay stub. "EE Clearing" is not a standard payroll accounting code, and to get a definitive answer, it's best to ask your employer. However, if your stub includes the code "EE Clearing," chances are good it refers to the way your employer processes the funds to cover your paycheck.
Fed Med EE: What is EE?
"EE" is a two-letter abbreviation for a single word: "employee." The abbreviation is usually used only in payroll accounting. The "e" at the end of "employee" is added to the "e" at the front to eliminate confusion as to other things that "e" could stand for, notably "expense." So when you see EE on your pay stub, it's generally referring to things that are specific to you.
How EE Might Appear on Your Pay Stub
EE is a standard code for the employee's share of certain Federal taxes. For instance, "FICA/EE," meaning the amount deducted from your paycheck for Social Security. The deduction for Medicare is coded "Fed MED/EE." But because EE is a Federal standard abbreviation, many accounting departments and payroll processing firms also use it for other references to the employee on pay stubs.
What "EE Clearing" Stands For
"EE Clearing" is a non-standard code in payroll accounting, but in all likelihood it stands for the employee clearing account your employer uses to process the funds for your paycheck. Clearing accounts are used in a number of other ways in business accounting, so there's a lesser chance the code on your check refers to some other funds that are being withheld or transferred to you, such as the account to which your employer deposits your Federal withholding taxes between the time they draw it from your paycheck and the time they send it to the IRS. If your employer offers advances on your salary, the amount of the advance is indicated and processed using the "EE advance" account.
How Employee Clearing Accounts Work
An employee clearing account is a separate bank account that's just used for payroll funds. The money for each paycheck is deposited into the account and recorded as an asset on the employer's books. Then, as each employee cashes his check, the amount is debited from the account. This makes it very easy to track whether and if all payroll checks for a period have been cashed; if there isn't a zero balance at a certain point, it means a check has been lost or there is some other payroll discrepancy.
EE stands for "employee." It is used to designate payroll deductions from an employee's paycheck.
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