Payroll Accounting 2009
Bernard J. Bieg and Judith A. Toland
THE NEED FOR
PAYROLL & PERSONNEL RECORDS
Developed by Lisa Swallow, CPA CMA MS
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Positions within payroll profession
 Range
from payroll clerk to senior payroll manager
 Salaries range accordingly
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Professional membership – American Payroll
Association [APA]
 Certified
Payroll Professional exam
Code of Ethics sets direction for profession
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Fair Labor Standards Act of 1938
State minimum wage and maximum hour laws
Federal Insurance Contribution Act (FICA)
Income tax withholding laws
 Federal,
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state and local
Unemployment tax acts
Fair employment laws
Other federal and state laws
 Federal Wage & Hour Law of 1938
 Minimum wage until 7/24/09 = $6.55/hour
 Then $7.25/hour by end of 2009
 Always get overtime
 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
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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
 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
 ER and EE pay
 SECA (Self Employment Contributions Act) applies to
self employed people
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Federal income tax
Levied on earnings of employees
 Income tax is withheld from paychecks
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State and local income tax
Income tax is withheld from paychecks
 Different in each state
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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
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SUTA (State Unemployment Tax Act)
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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
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Title VII of the Civil Rights Act of 1964
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EEO (Equal Employment Opportunity)
Can’t discriminate in hiring, firing,
promoting or compensating based on
color
 race
 religion
 national origin
 gender
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Gender orientation added in certain states
See http://www.eeoc.gov/ for more information
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ADEA states employers cannot use age to
discriminate in hiring firing or promoting
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applies to employers with 20+ employees
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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
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Prevents employers with 15 or more
employees from discriminating against
disabled employees and job candidates
based upon disability
‘Reasonable accommodation’ must be
provided
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This is a very vague term and subject to court
interpretation
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Requires employers to report all new
hires within 20 days to state agency
Records coordinated through Office of Child
Support Enforcement (OCSE)
 Fines of $25/hire levied for failure to report
 A few states now require same from
independent contractors
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Bars hiring and retaining aliens unauthorized
to work in U.S.
Accomplished by employee completing I-9
within 3 business days of employment
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Or termination may result
U.S. Citizenship & Immigration Services may
audit and levy penalties
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Criminal penalties if discriminatory practices found
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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
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ER continues health care coverage
Right to return to same/comparable job and
continue health coverage in absence
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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
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Doesn’t apply if dishonorably discharged
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Trustees must monitor pension plans
Vested 100% in 3-6 years
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Example of a vesting plan
Years of
Service
% Vested in
Pension Plan
2
50%
4
75%
5
100%
Provides for PBGC
 PBGC (Pension Benefit Guaranty Corporation)
is a federal agency which guarantees benefits
to employees
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Stringent recordkeeping required including
financial statements
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Workers’ Compensation
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Most states require employers to pay
workers compensation premiums
 Can self insure if state approved
 Different premiums based upon job class
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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!
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FLSA requires stringent personnel recordkeeping
Pre-hire inquiries like application/screening
document design and retention also critical
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No questions alluding to religion, gender, race, age or
national origin allowed
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Unless implicates ability to perform job (for example,
bilingual capabilities)
If application asks age/birth date, should contain
ADEA language notifying candidate of antidiscriminatory provisions
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Reference Checks
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Due to amount of litigation in this area, respondents should
only verify facts
 **not offer subjective information**
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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
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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, quarterto-date and year-to-date for each EE
 Paycheck
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 Paycheck or direct deposit
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Outsourcing Payroll
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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