1. Chapter 14: The Human Resources (HR) Management and Payroll Processes
ACCOUNTING INFORMATION SYSTEMS 11e
Gelinas ►Dull ► Wheeler ► HILL
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2. Logical description of the payroll process
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3. introduction
Human capital management (HCM) assumes that employees are a strategic investment rather than an administrative cost.
HCM automation can significantly improve all aspects of employee and employer interaction and can also affect the organization’s ability to satisfy employees with respect to being able to use flexible work hours, telecommuting, and the selection of optional benefits.
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4. Process Definition and Functions
HCM evolved from the concepts of “personnel management” and “human resource management.”
Traditional personnel management processes simply handled payroll and personnel administration and expanded into the human resource management process by adding functions.
HCM has further expanded those concepts to consider individuals as strategic assets of an organization.
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5. Definition of the HR Management Process (SLIDE 1 OF 2)
Human resources (HR) management process is an interacting system of people, equipment, activities, and controls. It includes:
Capturing, recording, and storing data concerning employees.
Creating and disseminating employee policies.
Evaluating and determining the types and levels of employee benefits to offer.
Evaluating competitive pay levels for a specific job description.
Preparing management reports and government reports.
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6. Integration of the HR Management and Payroll Processes (SLIDE 4 OF 5)
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7. Integration of the HR Management and Payroll Processes (SLIDE 5 OF 5)
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8. Organizational Setting and Managerial Decision Making (slide 1 of 2)
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9. The HR Management Process
(slide 2 of 3)
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10. The HR Management Process (slide 3 of 3)
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11. Implementing the HR Management Process (slide 1 of 2)
Figure 14.4 presents a systems flowchart of a typical HR management process.
This particular physical implementation employs technologies such as employee self-service systems.
Employee access to these systems via Web browsers or kiosks, and enterprise systems with workflow modules.
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12. Implementing the HR Management Process (slide 2 of 2)
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13. Processing Inputs
HR forms in the systems flowchart capture information about three HR-related events:
Selecting employees: May be initiated by department supervisors and managers or started automatically by the system.
Evaluating employees: Involves numerous activities including reviews which are initiated by managers and supervisors.
Terminating employees: Closes the employment process loop. Decision is usually based on qualitative and quantitative data.
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14. Processing logic and process outputs
HR requests initiated outside of the HR department are approved within that department and then routed to HR for approval.
Some data may be entered within HR.
Employee/payroll master data, skills inventory data, and labor-force planning data within the enterprise database are updated and various reports are made available.
Several internal and external outputs are produced.
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15. Key Data Tables
Labor-force planning data: Maintains data concerning an organization’s short-term and long-term staffing requirements.
Skills inventory data: Catalogs each employee’s set of relative skills. As employees gain new experience via on- the-job training or formal educational, the skills data are updated.
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16. The Payroll Process (slide 1 of 2)
Payroll processing is part of the accounting department under the supervision of the controller.
Controller’s office has line responsibility over the payroll function, but certain activities, such as distributing paychecks, are performed by the treasury function.
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17. The Payroll Process (slide 2 of 2)
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18. Logical description of the payroll process
(SLIDE 1 OF 14)
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19. Logical description of the payroll process (SLIDE 2 OF 14)
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20. Logical description of the payroll process (SLIDE 3 OF 14)
Figure 14.7
Process 1.0 (Perform data maintenance) periodically updates tax rates data. Two data flows enter the payroll process from departmental managers and supervisors:
Attendance time records show the time periods that employees are in attendance at the job site and available for work. These records are used to calculate the gross amount of each employee’s pay.
Job time records reflect the start and stop times on specific jobs. Their purpose is to allow the distribution of payroll costs to jobs in process (or to other accounts).
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21. Logical description of the payroll process (SLIDE 4 OF 14)
Process 2.0 (Reconcile hours worked) compares total hours on the attendance records with the job records.
Validated job records are sent to Process 3.0 (Distribute labor costs) which interfaces with the GL process to provide journal entries for the distribution of labor charges.
Validated attendance time records initiate the payment to workers in Process 4.0 (Pay employees).
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22. Logical description of the payroll process (SLIDE 5 OF 14)
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23. Logical description of the payroll process (SLIDE 6 OF 14)
Figure 14.8
Process 4.1 (Prepare paychecks) retrieves data from both the employee/payroll master data and the tax rate data.
Data includes personal information about the employee, tax status, pay, and payroll deductions.
Additions, deletions, and adjustments represent another needed class of data (entered by HR personnel for control reasons).
Process 4.2 prepares the disbursement voucher and Process 4.3 prepares the transfer check and sends it to the bank to cover the net payroll.
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24. Logical description of the payroll process (SLIDE 7 OF 14)
Process 5 (Accrue liabilities) accrues employer and withheld liabilities which are reported to the GL process.
Process 6 (Prepare payments and deposits) prepares the deposits and notifies the GL process of the deposit.
Process 7 (Prepare payroll tax reports) prepares:
Form 941 (report of wages taxable under FICA)
Form W-2 (wage and tax statement)
For 1099-R (annuities, pensions, or retired pay)
Employee Retirement Income Security Act (ERISA) reports
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25. Logical description of the payroll process (SLIDE 8 OF 14)
Employee/payroll master data: Central repository for data about people who work for an organization. This data table combines data that originate in two functional areas: HR and payroll.
Situation has potential control problems because staff in two departments can make changes to the data.
Solution is to restrict online access so that each department can only change what it has control over.
Easily implemented with enterprise systems through organizational role assignments, authorization levels, and access controls.
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26. Logical description of the payroll process (SLIDE 9 OF 14)
Primary key of an employee payroll record is the employee identification code.
Employee code can be designed to reflect certain employee attributes.
Code numbers can be used to provide management with labor-cost distributions.
Historical payroll data must be kept.
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27. Logical description of the payroll process
(SLIDE 10 OF 14)
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28. Logical description of the payroll process (SLIDE 11 OF 14)
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29. Logical description of the payroll process (SLIDE 12 OF 14)
Electronic time management system: Computer- based system that captures, stores, and reports time (attendance and work on jobs).
Payroll direct deposit system: Executes payments to employees. Net pay is sent electronically through the banking system, typically using the ACH Network, and deposited directly to the employees’ bank accounts.
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30. Logical description of the payroll process (SLIDE 13 OF 14)
Process begins with workers recording attendance and job time in an electronic time management system.
Once approved, the payroll system:
Distributes labor costs and updates employee/payroll master data.
Prepares paychecks for deposit to employee accounts.
Prepares outputs including pay stubs.
Sends payroll register to accounts payment where a disbursement voucher is prepared for the payroll and taxes.
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31. Logical description of the payroll process (SLIDE 14 OF 14)
Disbursement voucher is sent to cashier where transfer is made for the payroll to the imprest payroll account.
Several items are sent to the GL department so they can reconcile the amount to be paid (payroll register), the job time incurred (labor distribution summary), and the amount disbursed from the bank (disbursement voucher).
Many management reports can be generated for online viewing.
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32. Technology Trends and Developments (SLIDE 1 OF 4)
HR self-service systems typically include:
HR manuals, policies, and procedures
Helpful information for employees
Calculators for retirement income
Personal profile containing job, payroll, and benefits data
Forms for enrolling in programs
Places to making changes to existing programs
Links to important websites
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33. Technology Trends and Developments (SLIDE 3 OF 4)
Organizations leverage both technology and expertise by outsourcing all or part of the HCM process.
Enterprise systems play a major role in implementing required HR and payroll functionality, such as:
Integrating HR and payroll functionality.
Employee self-service functions.
Integrating HR management process with other modules such as financial accounting, logistics, and sales and distribution.
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34. Technology Trends and Developments (SLIDE 4 OF 4)
Payroll service bureau is a company that specializes in rendering payroll services to client companies.
By using a service bureau, an organization can outsource much of the payroll process, including payroll calculation, paycheck preparation and direct deposit, payroll tax reporting and payments, and payments to insurance and retirement programs.
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35. Physical Process Description (slide 1 of 2)
Figure 14.9 shows a systems flowchart for a typical payroll process.
Payroll events are entered in real time but processed in batches.
Payroll processing is generally done on a periodic basis, because employees are paid on a periodic basis (e.g., weekly, bi-weekly, semimonthly, monthly).
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36. Physical Process Description (slide 2 of 2)
Electronic time management system: Computer-based system that captures, stores, and reports time.
Payroll direct deposit system: Employee net pay is sent electronically through the banking system, typically using the ACH Network, and deposited directly to the employees’ bank accounts.
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37. The Fraud connection (slide 1 of 3)
Types of payroll frauds:
Ghost employees receive paychecks but do not work for the company. Former employees or completely fictitious.
Falsified hours and salary occur when employees overstate hours or increase the salary in their employee data.
Commission schemes occur when sales or commission rates are overstated.
Expense reimbursement frauds occur when employees are reimbursed for expenses not incurred.
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38. The Fraud connection (slide 2 of 3)
Employee expense reimbursement fraud schemes include the following:
Using legitimate documentation from personal expenses for a business expense.
Overstating expenses by altering receipts.
Submitting fictitious expenses by producing fake receipts.
Obtaining multiple reimbursements for one expense by submitting multiple copies of invoices.
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39. The Fraud connection (slide 3 of 3)
Some of the procedures that can be used to prevent or detect these schemes include the following:
Segregate duties among personnel data creation and modification.
Direct deposit payroll to eliminate alteration, forgery, and theft of paper checks.
Check for duplicate names, addresses, and social security numbers in the employee data. Compare actual to budgeted payroll.
Have employees request reimbursement based on a previously approved budget with expenses over the budget not being reimbursed.
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40. Application of the Control Framework
(slide 1 of 2)
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41. Application of the Control Framework
(slide 2 of 2)
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42. Recommended control plans (SLIDE 1 OF 3)
Enter time data close to the originating source: Capture data automatically if possible.
Approve attendance time data and job time data: Review and approval of the time worked by a department supervisor.
Reconcile attendance time data and job time data: Automatic reconciliation ensures time is recorded in both segments.
Distribute labor cost/Use a payroll clearing account.
Independent paycheck distribution: Periodic distribution by someone other than the supervisor ensures everyone being paid is a working employee.
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43. Recommended control plans (SLIDE 2 OF 3)
Approve payroll transfer check: This control only applies when a company uses an imprest payroll bank account.
Independent reconciliation of the imprest payroll bank account: An imprest payroll bank account is a bank account used solely for payroll purposes and is separate from a company’s other, more general-purpose bank accounts.
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