Payroll Accounting 2012 Bernard J. Bieg and Judith A. Toland THE NEED FOR PAYROLL & PERSONNEL RECORDS Developed by Lisa Swallow, CPA CMA MS CHAPTER 1 CHAPTER 5 CHAPTER 1

Learning Objectives  Identify various laws that affect employers in their payroll operations  Examine the recordkeeping requirements of these laws  Describe employment procedures generally followed in a Human Resources Department  Recognize the various personnel records used by businesses and outline the type of information shown on each form  Identify the payroll register and the employee’s earnings record

Many Laws Affect Payroll  Fair Labor Standards Act (FLSA)  Federal Insurance Contribution Act (FICA)  Income tax withholding laws  Federal, state and local  Unemployment tax acts  Recordkeeping requirements  Fair employment laws  Other federal laws  State minimum wage and maximum hour laws and other state specific laws LO-1

Current Legislation  Health Care and Education Reconciliation Act (HCERA)  Signed into law 3/30/10  Most provisions effective 2014  Immediately employer must include cost of employer- provided health coverage on employee’s Form W-2  Patient Protection & Affordable Care Act  Signed into law 3/23/10  Offers tax credit to small employers who offer health insurance to employees LO-2

State Laws  Workers’ Compensation Laws  Most states require employers to pay employees’ premiums  Can self insure if state approved  Different premiums based upon job class  State Disability Benefit Laws  Five states plus Puerto Rico have established laws requiring employers to provide disability benefits  This applies even if the disability did not arise due to employment! LO-2

Human Resource System  In many mid- and large-sized companies, the human resources (HR) system sets procedures/methods as relates to recruiting, selecting, orienting, training and termination personnel  FLSA requires stringent personnel recordkeeping – embodied in the Human Resource (HR) System  Requisition for Personnel notifies HR of need for new employees  Application for Employment completed by person seeking employment  No law prohibiting questions about religion, gender, race, age or national origin - but must tie into ability to perform job (for example, bilingual capabilities)  If application asks age/birth date, should contain ADEA language notifying candidate of anti-discriminatory provisions LO-3

Human Resource System  Reference Inquiry conducted before employment  Due to amount of litigation in this area, respondents should only verify facts and not offer subjective information  Really diminishes credibility of reference inquiries  Prospective employer may require applicant to sign Employment Reference Release  Must notify employee if seeking investigative consumer report  Hiring Notice alerts payroll department to new employee  Employee History Record contains performance evaluations, compensation adjustments, disciplinary issues, etc. Critical area – employment related litigation is very expensive and often times avoidable LO-3

Payroll Accounting System  All procedures and methods related to disbursement of pay to employees – documentation may include  Payroll Register - compiles data per paycheck  Employee Earnings Record - outlines earnings per period, quarter-to-date and year-to-date for each employee  Paycheck written or direct deposit made  Outsourcing Payroll  Many small- to mid-sized businesses hire a payroll company to do their processing  This is an independent company responsible for compliance LO-5