12-3 Payroll Management

Goals:

• Describe the components of a business’ payroll system.
• Identify information included in payroll records and paychecks.

Key Terms:

• payroll
• payroll record
• direct deposit

Payroll Systems – One of the most important financial duties of a business is maintaining a payroll. A payroll is the financial record of employee compensation, deductions, and net pay.  A payroll system maintains information on each employee to be able to calculate the company’s payroll and to make the necessary payments to each employee.
Most businesses pay every employee on a weekly, bi-weekly, or monthly basis.  A majority of employees in most businesses receive an hourly wage, but the wage rate may be different for each employee. Some employees work part time whil others work a full 40 hours or more a week. The rest of employees, especially managers and others in professional positions, receive a weekly or monthly salary.  Again, the amount of the salary for each person may be different. Some may earn additional payments in the form of commissions, bonuses, and profit sharing.
As a part of the compensation system, most businesses provide employees a range of benefits. Benefits may include insurance options, paid or unpaid vacations, sick leave and personal leave, retirement plans and education assistance. A business must keep records of employee benefits used. Many benefits are a part of payments made to employees as a part of the payroll.
The final part of payroll is tax records and payments. Businesses are responsible for making required federal and state payments for each employee. The taxes consist of income taxes, Social Security, Medicare, and unemployment taxes and are commonly referred to as payroll taxes.
                Income Taxes – The Federal government, most states (not Texas), and some local governments require employers to withhold income tax from their employee’s pay.  The taxes are based on the amount of wages and income and the number of employee dependents.
                Social Security and Medicare – These payments are often referred to as FICA (Federal Insurance Contributions Act). The government requires employers to withhold and deposit these contributions from the employee’s paychecks along with matching contributions by the employer.
                Unemployment Taxes – Employers pay Federal Unemployment Tax (FUTA) to the unemployment insurance system. The amount owed is based on the business’s total employee wages, Many states also have their own unemployment taxes.
Employers must withhold taxes from employee wages and salaries as well as make their own required contributions. Businesses must prepare and maintain tax records. They also have to send required payments to the government on time.
Most payroll systems are part of a larger personnel records system. That system is a central location for all information the company maintains on all employees from the time they are hired until after they no longer work for the business. Personnel records include personal information, employment history, performance evaluations, compensation records, and other information needed by the company. Most information in personnel files is confidential. Because of this, the business must carefully and securely maintain the records.
Preparing a Payroll – Maintaining payroll records and preparing paychecks is an ongoing and time-consuming task for a business. In the past, each employee completed and submitted a time card. Payroll clerks entered the information into each employee’s payroll record. When paychecks were to be issued at the end of each pay period, employee compensation and deductions had to be calculated, withholding and benefits records completed, and paychecks prepared. Today, computerized payroll systems make the process more efficient and accurate. The software needed to manage a basic payroll system can be purchased at a relatively low price. The system can collect employee work records each day. At the time paychecks need to be prepared, all information on benefits and deductions is entered and each employee’s pay is calculated. All payroll records are updated and individual paychecks are prepared electronically.
                Payroll Records – The form used to track each employee’s pay history is a payroll record. Each payroll record holds the employee’s name, Social Security number, address, and other needed personal information. It also includes individual tax information and a record of benefits such as vaction and sick days available and used. The employee’s current and year-to-date earnings, deductions, gross pay, and net pay are maintained in the payroll record. A similar payroll record is kept for each part-time and full-time employee. 
                Preparing Paychecks -   After all employees’ payroll records have been completed and pay amounts have been calculated, a paycheck is prepared for each person. Employees will want to know how the amount of pay they receive is determined and the type and amount of deductions made. Most businesses print an earnings report that is included with the employee’s paycheck. The earnings report usually includes information for the current period as well as the cumulative amounts for the year.
 Businesses may offer a direct deposit service for employees. With direct deposit, the employer transfers net pay electronically into the employee’s bank account. The employee does not receive a printed paycheck but is given a receipt of the funds transfer and an earnings report. The receipt may be posted on the benefits web site where the employee can print it out if desired.

Assignments:

Go to Online Resources (see link below). Select Chapter 12.

1 - Click on and complete the Crossword Puzzle, When you are finished, print out your puzzle, write your name on it and turn it in for a grade.

2 - Click on Online Quiz Prep. Take the Web Quiz.  When your quiz score is displayed, call the teacher over to see and record your score.

3 - Click on Study Tools
      Complete Lessons 1 -4
       Lesson 1 - Beat the Clock
       Lesson 2 - Sort It Out
       Lesson 3 - Test Your Knowledge
       Lesson 4 - Financial Performance Indicators

When your quiz scores are displayed, call the teacher over to see and record your scores.