Transcript Fundamentals of Payroll - Chicago Chapter APA

APA – Fundamentals of Payroll
Chapter 2 – Payroll Systems
March 10, 2012
Index
2.1 – The Payroll System
2.2 – Processing Methods
2.3 – Interfaces
2.4 – Controls
2.5 – External Audits
2.6 – Paying Employees
2.1 – The Payroll System
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Components:
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Hardware
Software
Network (provides communication)
Operators
Computerized Payroll System:
Improves efficiency of payroll department
and assists with: 1. Compliance, Timely
and Accurate Pay, Reporting, Record
Retention, Security and Control
2.2 – Processing Methods
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Processing Methods
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Batch – System codes and combines items
into groups of similar data. Typically do not
have access to data as the batch is being run.
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Real-time – System runs calculations and
updates records as the information is being
entered. Results are available immediately.
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Additional Methods:
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ESS – Employee Self Service
MSS – Manager Self Service
2.3 – Interfaces
The term Interface refers to the
capability of two data processing
elements to communicate.
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HR/Payroll
Benefits
Data Collection (job costing, labor,
equipment)
Bank (Check Reconciliation/ACH)
Time and Attendance
General Ledger
Integration
Reconciliation
2.4 – Controls
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Edits
Balancing and Reconciliation
Documentation
Data Auditing and Validating
Batch Controls
Correction Procedures
Accumulator Totals
System Updates/Upgrades
Security
2.5 – External Audits
Primary focus of External Audits is to
determine the following:
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Whether the financial statements are appropriate
Whether the financial assets are being properly
safeguarded
Whether there are risks to the financial well-being
that will affect the future balance sheets or income
statements
Internal Benefits of an Audit
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Don’t be afraid of an audit. Use the process as a
time to review your controls and procedures.
Discuss opportunities for improvement to controls
and procedures with the auditor. Their agreement
may assist you with your management.
2.5 – External Audits – cont.
Frequently Asked Auditor Questions
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Where are the blank checks stored?
Who signs checks?
Who approves payroll?
Where are files retained?
How is the accuracy of payroll verified?
Who reconciles the payroll checking account?
How do you ensure that taxes are withheld
accurately?
Are timely deposits made?
Are managers complying with new tax rules?
Are all payroll transactions properly recorded in
the general ledgers?
Are accrual accounts handled properly?
2.6 Paying by Check
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Separate payroll checking account
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Care of voided checks and manual checks
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Storage and access to blank checks
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Safeguarding against “Phantom Employees”
2.6 Paying by Direct Deposit
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No check signing equipment to guard
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No checks to get lost
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More advantageous for employees
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Loss of “float time” for employers
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Not practical for company with high turnover
2.6 The Direct Deposit
Process
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Setting up new enrollees
• Educating employees
• Promote direct deposit
• Need three pieces of information
• The employee bank routing number
• The type of account the payroll will be
deposited into
• The account number
• Checking the routing number
• Determining transmission methods
• Sending a prenotification
• Correcting mistakes
2.6 Automatic Clearing House
Flow
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Employee
Authorization
Company
ACH File
Originating Financial Institution
ACH File
ACH Files
Receiving Financial Institutions
Periodic Statement
2.6 Direct Deposit Issues
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Resolving late deposit issues
• Direct deposits should be available on the day
settled
Stopping direct deposit
Reversing direct deposit
Federal bank holidays
2.6 Paying by Payroll Card
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All the benefits of direct deposit without the bank
account
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Gives the employee independence, prestige, safety,
freedom, convenience and time
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Reduced costs for employers
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Employers need to work with bank to establish
individual accounts for each enrolled employee
2.6 Payment Timing and
Unclaimed Wages
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Each State requires employers to pay employees
within a certain time frame
Most states also limit the time between the end of a
pay period and payday
Most states do not allow more than 10 days
between the end of a pay period and payday
Escheat laws deal with unclaimed wages
Most states dictate how long the employer must
hold unclaimed wages
Both state laws and company procedures dictate
how and when unclaimed wages are recorded
2.6 – Paying Employees
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Paying by Check
Paying by Direct Deposit
Direct Deposit Process
Late Direct Deposit issues
Stopping Direct Deposit
Reversing Direct Deposit
Federal Bank Holidays
Paying by Payroll Card
Regulation of Payment Timing
Unclaimed Wages