Bernard J. Bieg and Judith A. Toland
PAYROLL
ACCOUNTING 2014
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THE NEED FOR PAYROLL &
PERSONNEL RECORDS
Chapter 1
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service or otherwise on a password-protected website for classroom use.
Learning Objectives
1.
2.
3.
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
© 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or
service or otherwise on a password-protected website for classroom use.
Learning Objectives (cont.)
4.
5.
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
© 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or
service or otherwise on a password-protected website for classroom use.
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
 Fair employment laws
 Other federal laws
 State minimum wage and maximum hour
laws and other state specific laws

LO-1,
LO-2
© 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or
service or otherwise on a password-protected website for classroom use.
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
LO-2
© 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or
service or otherwise on a password-protected website for classroom use.
Current Legislation (cont.)

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
© 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or
service or otherwise on a password-protected website for classroom use.
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
© 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or
service or otherwise on a password-protected website for classroom use.
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
LO-3
© 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or
service or otherwise on a password-protected website for classroom use.
Human Resource System (cont.)

FLSA requires stringent personnel
recordkeeping – embodied in the 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
LO-3,
capabilities)
LO-4
© 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or
service or otherwise on a password-protected website for classroom use.
Human Resource System (cont.)
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

LO-3
© 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or
service or otherwise on a password-protected website for classroom use.
Human Resource System –
Personnel Records

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
LO-4
consumer report
© 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or
service or otherwise on a password-protected website for classroom use.
Human Resource System –
Personnel Records (cont.)
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
© 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or
service or otherwise on a password-protected website for classroom use.
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
LO-4
© 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or
service or otherwise on a password-protected website for classroom use.
Payroll Accounting System
(cont.)

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
© 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or
service or otherwise on a password-protected website for classroom use.