Chapter 15

HRM/Payroll Cycle

RECURRING set of business activities and related data processing operations associated with effectively MANAGING EMPLOYEE WORKFORCE.

HRM - Bonus System

RESULTS OF EMPLOYEE BONUS SYSTEM: Employees may analyze their work environment and find ways to cut costs. Employees may work harder and may be more motivated to exceed target goals to earn a bonus. Employees may look for ways to improve service.

Theft or Fraudulent Distribution of Paychecks THREAT

Someone who does not authorize or record payroll should distribute paychecks and control the transfer of funds for direct deposit. -HELPS PREVENT PAYCHECKS BEING ISSUED TO A "PHANTOM" OR "GHOST" EMPLOYEE.

A payroll clearing account

The payroll clearing account is a general ledger account that is used in a two-step process to check the accuracy and completeness of recording payroll costs and their subsequent allocation to appropriate cost centers. A "ZERO BALANCE CHECK" REFERS TO THE PAYROLL CLEARING ACCOUNT SHOWS A ZERO BALANCE ONCE ALL ENTRIES ARE POSTED.

Payroll Cycle Activities

1) Update payroll master file -It is important that all payroll changes are entered in a timely manner and are properly reflected in the next pay period. 2) Update tax rates and deductions -These types of changes occur infrequently. 3) Validate time and attendance data Source document: time sheets -Pay schemes Fixed salary Seldom record their labor efforts on a time card Supervisors monitor their presence on the job Hourly basis (wages) Time card - used to record the hours worked and total hours worked for a pay period Sales staff often are paid either on a straight commission or on a salary plus commission basis. 4) Prepare payroll -PAYROLL REGISTER Report that lists each employee's gross pay, payroll deductions, and net pay. Sometimes the payroll register is accompanied by a DEDUCTION REGISTER which lists the miscellaneous voluntary deductions for each employee. Employee paychecks also typically include an EARNINGS STATEMENT, which lists the amount of gross pay, deductions, and net pay for the current period and year-to-date totals. 5) Disburse payroll -direct deposit improves efficiency 6) Calculate employer paid benefits and taxes -Many employers also offer their employees FLEXIBLE BENEFIT PLANS, under which the employee receives some minimum coverage in medical insurance and pension contributions 7) Disburse payroll taxes and miscellaneous deductions

Payroll service bureaus and PEOs are especially attractive to small and midsize businesses for the following reasons: Reduced costs Wider range of benefits Freeing up of computer resources All of the above

ALL OF THE ABOVE

The HRM provides information on: Hiring Terminations Pay-rate changes due to pay raises and promotions All of the above

All of the above

Control Objectives, Threats, and Procedures

All payroll transactions are properly AUTHORIZED. All recorded payroll transactions are VALID. All VALID, AUTHORIZED payroll transactions are RECORDED. All payroll transactions are accurately RECORDED. Applicable government regulations regarding remittance of taxes and filing of payroll and HRM reports are met. Assets (both cash and data) are safeguarded from loss or theft. HRM/payroll cycle activities are performed efficiently and effectively.

Inaccurate Time Data THREAT

CAN: Increase labor expenses Produce erroneous labor expense reports Damage employee morale Automation can reduce the risk of UNINTENTIONAL inaccuracies. The data entry program should include the following edit checks: FIELD CHECKS for numeric data in the employee-number and hours worked fields LIMIT CHECKS on the hours worked field A VALIDITY CHECK of the employee number

HRM - Employees

Experts estimate that the cost of replacing employees is 1.5 times greater than that of an employee's annual salary. Employee morale is VERY important. There are four key attitudes: 1)Employees believe they have the opportunity to do what they do best. 2)They believe their opinions count. 3)They think that coworkers are committed to quality. 4)They understand the connection between their jobs and the company's mission.

Outsourcing Options

In an effort to reduce costs, many organizations are outsourcing their payroll and HRM functions: A PAYROLL SERVICE BUREAU maintains the payroll master file for each of its clients and performs the payroll processing activities. A PROFESSIONAL EMPLOYER ORGANIZATION (PEO) not only processes payroll but also provides HRM services such as employee benefit design and administration. When organizations outsource payroll processing, they send time and attendance data along with information about personnel changes to the PAYROLL SERVICE BUREAU or PEO at the end of each pay period.