AC122.01: Seminar Unit 2August 31, 2011

School of Business and Management

Agenda• Welcome

• Discussion Board Grading

• Assignments Grading

• Chapter 1 –

• The Need for Payroll & Personnel Records

• Questions

Seminar Rules by Greg Rose1. If I type *BREAK* everybody quit typing, OK? Type “OK” if you get this one!

2. When asking questions, please RAISE YOUR HAND (TYPE //). Otherwise you might interrupt a stream of dialogue.

3. Please do NOT start side conversations.

4. Do not interject “I agree” or “good point” because this clutters the seminar. We assume you agree and think the point is good!

5. Don`t worry about typos. Be clear as you can and refrain from smileys and slang – use proper English.

• Assignments Grading

• Late Policy

• Seminar procedures and Polling

• Questions

Payroll Accounting 2011Bernard J. Bieg and Judith A. Toland

THE NEED FOR THE NEED FOR

PAYROLL & PERSONNEL RECORDSPAYROLL & PERSONNEL RECORDS

Developed by Lisa Swallow, CPA CMA MSDeveloped by Lisa Swallow, CPA CMA MS

CHAPTER 1CHAPTER 1

Discussion Thread:

Examine the sample Payroll Register and Employee Earnings Records in textbook on pages 1-18 and 1-19 and suggest any additional columns that might be added to either of these for human resources use, industry specific purposes, or any other reason. You may add links to your response to support your point of view, but you are being asked for your opinion, which does not need to be cited.

I also want to encourage you to explain why you have added the specific columns chosen…

Payroll Profession

Positions within payroll profession range from payroll clerk to senior payroll managerJob responsibilities increasing – average

entry-level salary is $33,409

Need to keep currentProfessional membership – American Payroll

Association (APA)“Code of Ethics” sets direction for profession

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

Fair Labor Standards Act (FLSA)

Federal Wage & Hour Law of 1938

Minimum wage is $7.25/hour

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

Covered in greater detail in Chapter 2

Federal Insurance Contributions Act (FICA)

Comprised of two taxes

Both taxes paid by ER (employer) and EE

(employee)

OASDI (Old Age, Survivors & Disability Insurance)

6.2% with a cap that is cost-of-living indexed

HI (Health Insurance Plan - Medicare)

1.45% with no cap

Covered in greater detail in Chapter 3

Income Tax Withholding Laws

Federal income tax Levied on earnings of employees Income tax is withheld from paychecks

State and local income tax Income tax is withheld from paychecksDifferent in each stateNot all states have state income tax

Covered in greater detail in Chapter 4

Unemployment Tax ActsFUTA (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 is

different SSA outlines standards that each state’s

unemployment compensation law must follow Used to pay unemployment benefits

Covered in greater detail in Chapter 5

Fair Employment Laws

Title VII of the Civil Rights Act of 1964 EEO (Equal Employment Opportunity)

Can’t discriminate in hiring, firing, promoting or compensating based on Color, race, religion, national origin or gender

Applies to all ERs who engage in an industry affecting commerce and employ 15 or more workers in each of 20 or more weeks

See http://www.eeoc.gov/ for more information

Age Discrimination in Employment Act (ADEA)

ADEA states employers cannot use age to discriminate in hiring, firing or promoting Applies to employers with 20 or more

employeesProvides protection to workers over 40 with a

few key exceptions

Americans with Disabilities Act (ADA)

Prevents employers with 15 or more employees from discriminating against qualified persons based upon disability

“Reasonable accommodation” must be provided - this is a very vague term and subject to court interpretation

Federal Personal Responsibility & Work Opportunity Reconciliation Act

Requires employers to report information on all new hires within 20 days to state agency Includes name, address and social security

number (submitting copy of W-4 suffices in many states)

Records coordinated through Office of Child Support Enforcement (OCSE)

Fines up to $25/hire levied for failure to report A few states now require same from

independent contractors

Immigration Reform and Control Act (IRCA)

Law that bars hiring and retaining aliens unauthorized to work in U.S.

Accomplished by employee completing I-9 (Employment Eligibility Verification) within three business days of employment

U.S. Citizenship & Immigration Services may audit and levy penalties Criminal penalties can apply if pattern of discriminatory

practices found

E-Verify is a system that allows ERs to check employment eligibility of new hires

Family Medical Leave Act (FMLA)

Covers companies with 50 or more EE within 75 mile radius

Employee guaranteed 12 weeks unpaid leave for Birth, adoption, critical care for child, spouse or parent Leave may be used all at once or at separate times – within 12

months of qualifying event Employer continues health care coverage Right to return to same job or comparable position

FMLA expanded to include up to 12 weeks when family member is on active duty or up to 26 weeks for line of duty injury/illness

Some states have paid family leave plans

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

Employee Retirement Income Security Act (ERISA)

Trustees must monitor pension plans

Vested 100% in 3-6 yearsExample of a vesting plan

Years of % Vested in ServicePension Plan

2 50%

4 75%

5 100%

Provides for Pension Benefit Guaranty Corporation A federal agency which guarantees benefits to EE

Stringent recordkeeping required

Current Legislation

Hiring Incentives to Restore Employment Act (HIRE) – 3/18/10 Gives ER tax credits if pay wages to previously unemployed new hire

Health Care and Education Reconciliation Act (HCERA) – 3/30/10

Most provisions effective 2014 Immediately ER must include cost of ER-provided health coverage on

EE’s Form W-2

Patient Protection & Affordable Care Act – 3/23/10Offers tax credit to small ERs who offer health insurance to EEs

State Laws

Workers’ CompensationMost states require employers to pay

employees’ premiums Can self insure if state approvedDifferent premiums based upon job class

State Disability Benefit LawsFive 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!

Human Resource SystemFLSA requires stringent personnel

recordkeeping – embodied in the Human Resource (HR) SystemRequisition for Personnel notifies HR of need for

new employeesApplication for Employment completed by person

seeking employmentNo law prohibiting questions about religion, gender, race, age

or national origin - but must tie into ability to perform job (for example, bilingual capabilities)

If application asks age/birth date, should contain ADEA language notifying candidate of anti-discriminatory provisions

Human Resource System 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 consumer

report

Hiring Notice alerts payroll department to new EE

Employee History Record contains performance evaluations, compensation adjustments, disciplinary issues, etc.

Critical area – employment related litigation is very expensive

and often times avoidable

Payroll Accounting SystemAll procedures and methods related to disbursement of

pay to EEs – documentation may includePayroll Register compiles data per paycheck

EE Earnings Record outlines earnings per period, quarter-to-date and year-to-date for each employee

Paycheck written or direct deposit made

Outsourcing PayrollMany small- to mid-sized businesses hire a payroll

company to do their processingAn independent company responsible for compliance

Record Keeping Requirements:

• Employee Data:– Name, Address, Gender, DOB, FLSA FICA, FIT and FUTA

• Employment Data: – Wages, hours worked per day/per week, overtime

hours and rate, exempt pay, pay periods and dates of payment.

• Tax Data:– Employee wages that are subject to taxes for a pay

period and calendar year.

• General Data:– Record keeping data

HUMAN RESOURCES HIRING PROCESS:

• Receive request for new employee

• Examine Application form

• Interview Applicants

• Administer Tests

• Check References

• Select and Notify Successful Applicants– Send Information to Payroll Department– Prepare Personnel file

Payroll Register

• List of all employees for each pay period showing their gross pay, deductions and net pay.

• Generally used for compliance with FLSA

Employee Earnings

•Employee’s earnings record is a separate record for each employee showing the same information as the payroll register along with accumulated earnings.

• Used to prepare:– W-2s– Wage and Tax Statements

Questions

Thank you for attending this seminar.