1. THE NEED FOR PAYROLL & PERSONNEL RECORDS
CHAPTER 1
THE NEED FOR
PAYROLL & PERSONNEL RECORDS

2. Payroll Profession Positions within payroll profession
Range from payroll clerk to senior payroll manager
Professional membership – American Payroll Association (APA)
Certified Payroll Professional exam

3. Many Laws Affect Payroll
Fair Labor Standards Act of 1938
State minimum wage and maximum hour laws
Federal Insurance Contribution Act (FICA)
Income tax withholding laws
Federal, state and local
Unemployment tax acts
Fair employment laws
Other federal and state laws

4. Fair Labor Standards Act
Federal Wage & Hour Law of 1938
Minimum wage ($6.55/hour) plus overtime
Fair Minimum Wage Act of 2007 raises to $7.25 by July 24, 2009
Equal pay for equal work provisions
Sets law for companies involved
in interstate commerce or
in production of goods/services for interstate commerce
Requires payroll records be maintained

5. State Minimum Wage & Maximum Hours Laws
State Minimum Wage & Maximum Hours Laws
Established minimum wage rates for specific industries
Employees covered by both federal and state laws receive the higher hourly rates
State minimum rates and regulations vary (
to see minimum wage by state

7. Federal Insurance Contribution Act (FICA)
Federal Insurance Contribution Act (FICA)
Comprised of two taxes paid by employers (ER) and employees (EE)
OASDI (Old Age, Survivors & Disability)
6.2% with a cap that changes each year
ER and EE pay
HI (Hospital Insurance, part of Medicare)
1.45% with no ceiling
SECA (Self Employment Contributions Act) applies to self employed people

8. Income Tax Withholding Laws
Federal income tax
Levied on earnings of employees
Income tax is withheld from paychecks
State and local income tax
Different in each state

9. Unemployment Tax Acts FUTA (Federal Unemployment Tax Act)
FUTA (Federal Unemployment Tax Act)
ER tax –paid on $7,000 per EE per year
Taxes used to pay state and federal administrative expenses, not used to pay unemployment benefits
SUTA (State Unemployment Tax Act)
Mandatory unemployment insurance - each state has different laws
SSA outlines what kinds of standards each state’s unemployment compensation law must follow
Used to pay unemployment benefits

10. See http://www.eeoc.gov/ for more information
Fair Employment Laws
Title VII of the Civil Rights Act of 1964
EEO (Equal Employment Opportunity)
Can’t discriminate in hiring, firing, promotion or compensating based on
color
race
religion
national origin
gender
Gender orientation added in certain states
See for more information

11. The Age Discrimination in Employment Act (ADEA)
The Age Discrimination in Employment Act (ADEA)
ADEA states employers cannot use age to discriminate against hiring/firing/promoting
Applies to employers with 20+ employees
Exception to rule is
Executives aged 65 or over and
Who hold key strategic decision-making positions for prior two-year period
Can face mandatory retirement if annual pension from ER will be at least $44,000

12. Americans with Disabilities Act (ADA)
Prevents employers with 15 or more employees from discriminating against disabled employees and job candidates based upon disability
“Reasonable accommodation” must be provided
This is a very vague term and subject to court interpretation

13. Personal Responsibility & Work Opportunity Reconciliation Act
Requires employers to report all new hires within 20 days to state agency
Records coordinated through Office of Child Support Enforcement (OCSE)
Fines levied for failure to report
A few states now require same from independent contractors

14. Immigration Reform and Control Act (IRCA)
Immigration Reform and Control Act (IRCA)
Bars hiring and retaining aliens unauthorized to work in U.S.
Accomplished by employee completing I-9 within 3 business days of employment (or termination may result)
U.S. Citizenship & Immigration Services may audit and levy penalties
Criminal penalties where discriminatory practices are found

15. Family Medical Leave Act (FMLA)
Family Medical Leave Act (FMLA)
Covers companies with 50+ employees within 75 mile radius
EE guaranteed 12 weeks unpaid leave for
Birth, adoption, critical care
Can use for child, spouse or parent
Leave may be used all at once or at separate times – but must be within 12 months of qualifying event
ER continues health care coverage
Right to return to same/comparable job and continue health coverage in absence

16. Uniformed Services Employment & Reemployment Rights Act
Military personnel given right to take leaves of absences from civilian jobs
Right to return to prior jobs with seniority intact
Health benefits must be started without a waiting period
Doesn’t apply if dishonorably discharged

17. Employee Retirement Income Security Act (ERISA)
Employee Retirement Income Security Act (ERISA)
Trustees must monitor pension plans
Vested 100% in 3-6 years
Example of a vesting plan
Years of % Vested in Service Pension Plan
2 50%
4 75%
5 100%
Provides for PBGC
Pension Benefit Guaranty Corporation - a federal agency which guarantees benefits to employees
Stringent recordkeeping requirements

18. State Laws Workers’ Compensation State Disability Benefit Laws
Workers’ Compensation
Most states require employers to pay workers compensation premiums
Can self insure if state approved
Different premiums based upon job class
State Disability Benefit Laws
A few states have established laws requiring employers to provide disability benefits to employees that become disabled
This applies even if the disability did not arise due to employment!

19. Human Resource System
FLSA requires stringent personnel record- keeping
Pre-hire inquiries like application/screening document design and retention also critical
No questions alluding to religion, gender, race, age or national origin
Unless implicates ability to perform job (for example, bilingual capabilities)
If application asks age/birth date, should contain ADEA language notifying candidate of anti-discriminatory provisions

20. Human Resource System (continued)
Reference Checks
Due to amount of litigation in this area, respondents should only verify facts (not offer subjective information)
Really diminishes credibility of reference inquiries
Prospective ER may require applicant to sign “Employment Reference Release”
Interview records should be written/retained
Employee history record contains performance evaluations, compensation adjustments, disciplinary issues, etc.
Critical area – employment related litigation is very expensive and often times avoidable

21. Payroll Accounting System
Payroll Department documentation
Change in payroll rate form notifies proper departments of rate change
Payroll Register compiles data per paycheck
EE Earnings Record outlines earnings per period, quarter-to-date and year-to-date for each EE
Paycheck
Paycheck or direct deposit
Outsourcing Payroll
Many small to mid-sized businesses hire a payroll company to do their processing
This independent company responsible for compliance and can quickly and efficiently process payroll