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CHAPTER 1

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CHAPTER 1

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  1. 0 Payroll Accounting 2009 Bernard J. Bieg and Judith A. Toland CHAPTER 1 THE NEED FOR PAYROLL & PERSONNEL RECORDS Developed by Lisa Swallow, CPA CMA MS

  2. Payroll Profession • 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

  3. 0 Many Laws Affect Payroll • 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

  4. 0 FairLabor Standards Act • 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

  5. 0 StateMinimum Wage & Maximum Hours Laws • 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

  6. 0 Federal Insurance Contribution Act (FICA) • 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

  7. 0 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 paychecks • Different in each state

  8. 0 UnemploymentTax Acts • 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

  9. 0 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 • gender • Gender orientation added in certain states See http://www.eeoc.gov/ for more information

  10. 0 TheAge Discrimination in Employment Act (ADEA) • 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

  11. 0 Americans with Disabilities Act [ADA] • 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

  12. 0 PersonalResponsibility & Work Opportunity Reconciliation Act • 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

  13. 0 ImmigrationReform and Control Act [IRCA] • 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

  14. 0 FamilyMedical Leave Act [FMLA] • 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

  15. UniformedServices 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

  16. 0 EmployeeRetirement Income Security Act [ERISA] • 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

  17. 0 State Laws • Workers’ Compensation • Most states require employers to pay workers compensation premiums • Can self insure if state approved • Different 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!

  18. 0 Human Resource System • 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

  19. 0 Human Resource System (continued) • 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

  20. 0 Payroll Accounting System • 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