Payroll Accounting 2013
Bernard J. Bieg and Judith A. Toland
CHAPTER 5
CHAPTER 1
THE NEED FOR PAYROLL & PERSONNEL
RECORDS
Developed by Lisa Swallow, CPA CMA MS
Learning Objectives
• Identify various laws that affect employers in their payroll
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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
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Federal, state and local
• Unemployment tax acts
• 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
• Beginning 2013 single filers with wages over $200,000 and joint
filers with wages over $250,000 must pay additional Medicare taxes
• Patient Protection & Affordable Care Act
• Signed into law 3/23/10
• Offers tax credit to small employers who offer health insurance to
employees
• If employer pays 50% or more of cost of premium, the credit is
35% (25% for tax exempt organizations)
LO-2
State Laws
• Workers’ Compensation Laws
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Most states require employers to pay employees’
premiums
Can self insure if state approved
• Different premiums based upon job class
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• State Disability Benefit Laws
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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 for recruiting, selecting, orienting, training and
terminating personnel
• FLSA requires stringent personnel recordkeeping – embodied in the HR
System
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Requisition for Personnel notifies HR of need for new employees
Application for Employment completed by person seeking employment
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No law prohibiting questions about religion, gender, race, age or national origin - but
must tie into ability to perform job (for example, bilingual capabilities)
Aptitude testing only legal if related to job performance, lie detector tests are
illegal and drug testing is dependent upon employer’s state of origin
• Preparing comprehensive job descriptions protects companies from
discrimination charges
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LO-3
Human Resource System –
Personnel Records
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Reference Inquiry conducted before employment
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Due to amount of litigation in this area, respondents should only verify
facts and not offer subjective information
Really diminishes credibility of reference inquiries
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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, performance
appraisals, etc.
Critical area – employment related litigation is
very expensive and often times avoidable
LO-4
Payroll Accounting System
• All procedures and methods related to disbursement of pay to
employees – documentation may include
• Payroll Register - compiles data per payroll period
• 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-4