The Payroll Process
•
Many companies
often merge payroll and HR
•
The payroll
process maintains records of payroll taxes, fringe benefits,
attendance/absence, time worked and employee paychecks
•
The payroll
process is generally automated because computers are much faster at handling
the repetitive computations necessary (payroll is also the most frequently
outsourced application in accounting)
•
Current HR
software reaches far beyond simply doing payroll and includes:
–
Benefits admin,
applicant tracking/processing, skills inventories and compliance reporting
•
Much of HRM is
NOT captured by GAAP
–
But accountants
must recognize the immense value of human capital and its effect on the
long-term financial health of the organization
The Payroll Process
•
Payroll generally
falls under the controller’s office with the treasurer participating in
distributing paychecks
Payroll Data and Flows
•
Tax rates data
–
Contains current
tax rates (federal, state, county and city) for employee withholding and
employer accruals
•
Attendance time
record
–
Lists hours
employee are at the job site available for work; usually kept on time card
•
Job time records
–
Start and stop
times for particular jobs for direct labor distribution
Federal Payroll Tax Reports
•
941 (report of
FICA taxable wages)
•
W-2 (employee
wage and tax statement)
•
1099 (reports non-salary
income)
•
Employee
Retirement Income Security Act (ERISA) reports (reports on private pension fund
assets management)
Payroll System Controls
•
Segregation of
duties between HR (employee record creation), payroll (prepares payroll) and
AP/cashier (disburses cash)
•
Direct deposit
(eliminates opportunity for check fraud)
•
Review of
employee master data for duplicate names and/or social security numbers
•
Comparison of
actual payroll to budget
**PAYROLL**
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