THE NEED FOR PAYROLL & PERSONNEL RECORDS Developed by Lisa Swallow, CPA CMA MS Payroll Accounting 2009 Bernard 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

Payroll Accounting 2009Payroll Accounting 2009

Bernard J. Bieg and Judith A. TolandBernard J. Bieg and Judith A. Toland

Positions within payroll profession Range from payroll clerk to senior payroll

manager Salaries range accordingly

Professional membership – American Payroll Association [APA] Certified Payroll Professional exam

Code of Ethics sets direction for profession

Fair Labor Standards Act of 1938 State minimum wage and maximum hour

laws Federal Insurance Contribution Act (FICA) Income tax withholding laws

Federal, 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

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 yearER 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

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

State and local income tax Income tax is withheld from paychecks Different in each state

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

SUTA (State Unemployment Tax Act) 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

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 gender

Gender orientation added in certain statesSee http://www.eeoc.gov/ for more information

ADEA states employers cannot use age to discriminate in hiring firing or promoting applies to employers with 20+ employees

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

Prevents employers with 15 or more employees from discriminating against disabled employees and job candidates based upon disability

‘Reasonable accommodation’ must be provided This is a very vague term and subject to

court interpretation

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

Bars hiring and retaining aliens unauthorized to work in U.S.

Accomplished by employee completing I-9 within 3 business days of employment Or termination may result

U.S. Citizenship & Immigration Services may audit and levy penalties Criminal penalties if discriminatory practices

found

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

ER continues health care coverage Right to return to same/comparable job and

continue health coverage in absence

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

Trustees must monitor pension plans Vested 100% in 3-6 years

Example of a vesting plan Years of % Vested in Service 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

Stringent recordkeeping required including financial statements

Workers’ Compensation Most states require employers to pay

workers compensation premiums Can self insure if state approvedDifferent 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!

FLSA requires stringent personnel record- keeping

Pre-hire inquiries like application/screening document design and retention also critical No questions alluding to religion, gender, race,

age or national origin allowed Unless implicates ability to perform job (for

example, bilingual capabilities) If application asks age/birth date, should

contain ADEA language notifying candidate of anti-discriminatory provisions

Reference Checks Due to amount of litigation in this area, respondents

should only verify facts **not offer subjective information**

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

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,

quarter-to-date and year-to-date for each EE Paycheck

Paycheck or direct deposit

Outsourcing Payroll 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