payroll cycle Essay

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Payroll Cycle

Every company must have some sort of payroll department. Smaller business may have a human resources department that will also handle payroll or even may out source to a third party company. Either way the company still has an individual or department responsible for payroll. Having a designated department or individual who understand this area is important so that the employees receive the correct pay and have the correct deductions taken out of their checks.
The payroll administrator must add new or revise existing employee data before running payroll. For example, the administrator must create an employee payroll profile for a new hire. The profile includes her personal information, such as her Social Security number and payment details, her tax information and pretax deductions, such as health insurance premiums. If an existing employee has had any information changes, such as a new pay rate, the administrator must make these changes before running payroll (Assad, 1999). The administrator must calculate employees' work time for payment purposes using the company's method of timekeeping. If the timekeeping is manual, the administrator has to add the hours together herself. If the company uses automated timekeeping, such an electronic time card, the person responsible for approving the hours usually just has to confirm the time shown is correct for payroll processing and fix any errors before final approval.
An electronic payroll system usually has applicable pretax work benefits, such as dental premiums, federal and local taxes and pay rates, already inputted. Once the responsible person verifies the employee's hours, the payroll system calculates her net wages using the inputted figures. The payroll administrator must figure out these calculations herself if the payroll system is manual, using information from the employee's file or the company's payroll records. The administrator checks the direct deposit or paycheck amounts to confirm all the information is correct once payroll is set. He confirms the amounts a second time after sending the direct deposit or printing the employee checks. The administrator can usually print out or view reports if the payroll is automated. A person running a manual payroll must double-check using an applicable method, such as directly confirming direct deposit transmissions with the company's bank. The administrator must address other payroll-related matters, such as the deposit of withheld taxes to the correct place, after the employees receive their pay. What happens next depends on the company's payroll practices. For example, a company may send payroll reports and withheld taxes to a third party they've hired to handle tax deposits and payments (Assad, 1999).
Risks in the payroll cycle are as follows:
Time keeping
Access to Secure Information
Inaccuracies in data entry
Mistakes on taxes, and other deductions
Information not being updated in timely manner
Ghost employees
In regards to time keeping this pertains to employee time cards or scan badges not being used properly. Time cards may be in accurate if the employee does not clock in or out on time. The same can occur with a scan badge. Also if the company uses software such as people soft and has the employee put in their own time data entry error can occur. The employee can also not report the time correctly. For example, if the employee worked 20 hours and had 20 hours of vacation or FMLA and this time is not put into people soft correctly it will cause a problem for the payroll when the employee is not paid correctly. Of course when the error hinders the employee they are going to speak up to get it corrected but when the error hinders the company the employee may not say anything right away which is why this department should have regular audits. The payroll administrator will have access to private information such as the employee’s name, date of birth, social security number, home address, and
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