Professional Documents
Culture Documents
Introduction
The human resources management (HRM)/payroll cycle is a recurring set of
business activities and related data processing operations associated
with effectively managing employee workforce. The more important tasks
include:
1. Recruiting and hiring new employees
2. Training
3. Job assignment
4. Compensation (payroll)
5. Performance evaluation
6. Discharge of employees due to voluntary or involuntary termination
Tasks 1 and 6 are performed once and tasks 2 through 5 are performed
repeatedly.
This chapter focuses primarily on the payroll system.
Overview
The HRM provides information on hirings, terminations, and pay-rate
changes due to pay raises and promotions.
The various departments provide data for the hours worked.
The government provides the tax information and requirements.
The principal output for the payroll cycle is checks.
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Pay Schemes
Most employees are paid either on a fixed salary or on an hourly
basis (wages).
For those paid on an hourly basis, many companies use a time card
which is used to record the hours worked. The time card also
includes the total hours worked for a pay period.
Employees who earn a fixed salary seldom record their labor
efforts on a time card. Instead, their supervisors monitor their
presence on the job.
Sales staff often are paid either on a straight commission or on a
salary plus commission basis.
Nucor Corporation, a large steel company, pays its steelworkers an
hourly rate at approximately 60 percent of the industrial average,
plus a bonus based on the tons of steel (tonnage) they produce.
Focus 15-2 on page 445 explains that accountants should be
involved in reviewing a companys compensation practices.
The FASB issued new rules requiring that stock options be
expensed and the major U.S. stock exchanges now require
companies to obtain shareholder approval of all equity-based
compensation.
Efficiency Opportunities Using Information Technology
Payroll processing can be made more efficient by collecting
employee time and attendance data electronically instead of on
paper documents.
Those data are then automatically fed to the payroll processing
system.
Also, electronic time clocks can transmit time and attendance data
directly to the payroll processing system.
Prepare Payroll
The fourth step in the payroll cycle is preparing payroll (circle 4.0 in
Figure 15-4.
Procedures
1. The payroll transaction file is sorted by employee
number.
2. The sorted time-data file is then used to prepare
employee paychecks.
3. Next, all payroll deductions are summed and the total is
subtracted from gross pay to obtain net pay.
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Disburse Payroll
The next step is actual disbursement of paychecks to employees (circle
5.0 in Figure 15-4). Most employees are paid by either check or direct
deposit.
Procedures
The following procedures are followed:
1. Once paychecks have been prepared, the payroll register is
sent to the accounts payable department for review and
approval.
2. A disbursement voucher is then prepared to authorize the
transfer of funds from the companys general checking
account to its payroll bank account.
3. The disbursement voucher and payroll register are then sent
to the cashier.
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2. Employee performance
Is turnover excessive?
3. Employee morale
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Employment Practices
The objective of the HRM function is to efficiently hire, develop,
retain, and dismiss employees.
Threat 1Hiring Unqualified or Larcenous Employees
Hiring unqualified employees can increase production expenses, and
hiring a larcenous employee can result in theft of assets.
Skill qualifications for each open position should be stated explicitly
in the position control report.
It is especially important to verify a job applications skills and
references, including college degrees earned, because research shows
that approximately 30 percent of resumes contain false information.
Background checks should also be conducted.
Threat 2Violation of Employment Law
The government imposes stiff penalties on firms that violate provisions
of employment law.
The best control procedure is careful documentation of all actions
relating to advertising, recruiting, and hiring new employees and
dismissal of employees.
Payroll Processing
The objective of payroll processing is to efficiently and effectively
remunerate employees for the services they provide.
Threat 3Unauthorized Changes to the Payroll Master File
Unauthorized changes to the payroll master file can result in increased
expenses if wages, salaries, commission, or other base rates are
falsified.
Proper segregation of duties is the key control procedure for dealing
with this threat.
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General Controls
As for other disbursements, there are two general threats: 1) the loss,
alteration, or unauthorized disclosure of data and 2) poor performance.
Threat 7Loss, Alteration, or Unauthorized Disclosure of Data
Backup and disaster-recovery procedures provide the best controls for
reducing the risk of payroll data loss.
Physical and logical access controls are important preventive measures
to mitigate this threat.
Access and processing integrity controls are also needed to ensure the
confidentiality and accuracy of payroll cycle data transmissions.
Finally, protecting the privacy of employee data also is important.
Threat 8Poor Performance
Preparing and reviewing performance reports is an effective means of
addressing the threat of poor performance.
Careful monitoring of employees productivity is necessary to determine
if the employee is working the hours in which they are getting paid for.
Also, that the employees are not conducting personal business during
working hours, such as using the companys computer to send personal emails or shopping on the Internet.
Training is also important. It is estimated that training costs
represent 2 percent of total labor costs for manufacturing companies.
Online classes provide a means to reduce training costs.
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