fundamentals of payroll operations fpc 2015 chapter 2
TRANSCRIPT
Fundamentals of Payroll Operations
FPC 2015Chapter 2
The Payroll System
Components Hardware- Physical Components Software- Programs Network-Communications People-Operators of the System
Computerized Systems help with these tasks:
Compliance w/Regulations and Policies
Timely & Accurate Paychecks/Direct Deposit
Periodic Reporting Record Retention Control & Security
Processing MethodsBatch or Real-time
Batch Processing Data is coded and collected Computer center processes the data
with similar jobs to be processed Generally no access to view as
processing Less expensive than real-time But not as timely as real-time
Processing MethodsBatch or Real-time
Real-Time On-line system Calculations and results automatic Immediate availability View and interact with the processing
Processing MethodsBatch or Real-time
Most companies utilize a blend of batch and real time processing for the most cost effective and efficient processing results
Employee and Manager Self–Service Availability
Employees and managers can update data to the master files online
View / Print earning statements
View/ Print W2 forms
Interfaces- Definition: The point where two distinct data
processing elements meet Example- 2 pieces of hardware; 2 pieces
of software or hardware & software.
Automated interfaces are only entered once.
Automated interfaces are more accurate and timely.
Interfaces-Most Common Payroll Interfaces:
Human Resources Benefits Data Collection- special labor costs Time and Attendance Check Reconciliation Electronic Funds Transfer General Ledger/ Cost Accounting
Integration-Ideal Processing Environment
Single integrated (shared) data base: Reduce data integrity issues Eliminates timing issues Eliminates interfacing
Interfaced or Integrated Reconciliations
Ensures the data shared between the systems is accurate.
General Ledger accounts Regular interval balancing Utilization of zero balance accounts
Reconcile 3rd Party Payments 401K, Liens, unions insurances Reconcile payments from AP or PR to ensure
compliance
Control ProceduresWhy?
Control Procedures: System Edits Balancing & Reconciliation Documentation Data Auditing & Validation Batch Controls & Correction Procedures Accumulator Totals Updating/upgrading system Security External Audits
Control ProceduresSystem Edits or Validity Checks
Alert for termed ees w/ pay New hire tracking Error if no pay for an active ee Alert for inactive ee w/ pay Alert if pay over a specific amount Alert for negative or zero pay Alert for hours over a specific amount Pay rate changes
Control ProceduresBalancing and Reconciliation
Master record of ee payments to substantiate tax returns
Payroll liability accounts reconciled to verify liability and unpaid taxes (monthly)
Liability accounts for deductions balanced to ensure accuracy for AP
Bank accounts reconciled , unclaimed wage account, stale dated payments, outstanding payments
Control ProceduresDocumentation
Ensures Uniformity Simplifies Training Provides a reference tool
Control ProceduresData Auditing and Validating
Sampling of data for verification and internal parameter control
Substantiates validity of data Promotes accuracy
Batch total verifications Correction Procedures Accumulator Totals
Control ProceduresUpdates/ Upgrades
Updates: Quarterly Year-end Tax UpdatesBe sure to back up the system prior to the update
Upgrades: More Complex New Features Process enhancementBe sure to consider this as a project
Control ProceduresSecurity
Of the utmost importance against Embezzlement Check fraud Identity theft
Control Procedures Security Guards
Job Segregation Personnel Rotation System Restrictions Internal controls for specific
functions Internal audits Independent reconciliations Employee payment verifications
Control ProceduresSecurity Guards (Cont.)
Reconcile bank accounts monthly Password levels –system accessibility Physical payouts Written procedures for undelivered
checks Procedures for processing void pays Audit trails
Control ProceduresExternal Audits
Appropriateness of financial statements
Safeguarding of financial assets Level of risks to the company
financial futures
Paying Employees
State laws dictate frequency, pay options and may dictate bank be in state ee work.
Employer’s choice to pay by: Cash Check Direct Deposit Pay Cards
Pay by Check Special zero account for payroll checks Voiding/ check cancellations need to be
processed through payroll and then notifications to other appropriate depts such as GL, tax, treasury, finance
Precautions/ security for blank checks Proper handling procedures a must
Pay by Direct DepositElectronic Funds Transfer (EFT)
Employee Advantages Immediate funds availability on payday No delay in constructive receipt of pay No bank interaction necessary
Employee Disadvantages Comfort level of payment method Lack of bank account
Pay by Direct DepositElectronic Funds Transfer (EFT)
Employer Advantages No lost checks Reduction of paper flow Eliminates early manual processing Reduction of loss potential Cost reduction No check signing Minimizes cancelled check storage Reduction of escheatment Reduction of balance and reconciliation
Pay by Direct DepositElectronic Funds Transfer (EFT)
Employer Disadvantages Not paperless Multiple pay methods Stop Payment Challenges Costs imposed by originating bank Loss of “Float” Def- Float is the time between
the writing of the paychecks and the actual withdrawal of funds to cover the paychecks.
Direct Deposit Process
Regulated by the Federal Reserve Board’s Regulation E.
NACHA’s ACH Requirements NACHA Operating Rules
State Laws
Direct Deposit Process
Three pieces of information needed: EE Bank routing number EE Bank account number Type of Account –Savings or
Checking
Prenotification-Are they optional?
Direct Deposit Process Flow Employee authorization Company set up ACH file(Automatic Clearing House) ODFI- Posts on us –>new ACH file sent RDFI Posting to account-> Descriptive
statement
Direct Deposit Corrections/ Reversals
Single entry reversals Must be corrected in 5 days Does not require employee
authorization Corrections /reversals must be
same amount as deposit on settlement date
Resolving Late Direct Deposit Verify routing and account numbers ATM may have a later posting time than
the actual bank processing time Funds should be available by 9:00 a.m.
on pay date-internal bank challenges –bank should honor based on voucher
ODFI can be contacting as resource and resolution agent
Federal Bank Holiday
Payment by Pay Card
Pay cards are solutions for the unbanked
Prepaid cards that are host based , stored value cards for the unbanked employees to obtain cash, pay bills, by a convenient and secure medium
Payment by Pay CardEmployer Benefits
Reduction of costs Enhanced efficiency Increased employee productivity
/satisfaction Employee need not have a bank
account
Payment by Pay CardEmployee Advantages
Cost savings – especially for unbanked
Independence Prestige Safety/Security Freedom Convenience Time
Payment by Pay CardEmployer Advantages
Cost reduction Enhance efficiency / productivity Legal compliance requirements
Payment by Pay CardCost Advantage
Cost reduction Check loss –theft Fraudulent checks-duplicate
payments Check printing, storage, retention,
and reconciliation Special payment and exception
payments
Payment by Pay CardEfficiency Advantage
Eliminated payroll checks Electronic pay statements Funding via ACH Administration via web- application Ease of Constructive receipt No loss of production time
Payment by Pay CardCompliance Advantage
Constructive receipt is immediate and meets many stringent timeframes imposed for payment to employees.
Payment by Pay CardStarting a Program Ensure agreement with a participating
financial institution Market offering to employees Establish a funding pool with bank Institution establishes employees
account*Card When the pool is funded the bank loads
the cards with the appropriate net amounts
Funding is via ACH or intra bank transfer Adjustments made via web application
Payment by Pay CardReversals
Specific policy & procedure to provide stop payment /reversal
Procedure steps may include Notification to bank to reverse card
payment Reissue the payment
Payment Timing Regulations
States laws govern: The method of payment Frequency of payment Time period between the end of
the pay period and pay day
Unclaimed WagesEscheatment
State laws governing the procedures for
unclaimed wages Length of time payment held Notification of held funds process Wage turnover to agency
Thank You!!
Good Luck with your FPC test!! Christine O’Hara, CPP
312-474-3221 Christine.O’[email protected]