Unit 1: intro to payroll Flashcards
define payroll
is the process of paying the employees working for your organization in exchange for services rendered
Define Payroll professionals
- have many responsibilities
- deal with internal customers (stakeholders) and external agencies
- have to know many statutory and contractual obligations (these rules change frequently, gov. legislation and new collective agreements)
If payroll is not processed in compliance with government legislation what can happen
the employer could be liable for substantial fines, interest and penalties
What can payroll refer to?
- department that administers payroll
- a list of person to be paid and amount due to each
- total wages and salaries paid out in a year
- total number of people employed by an organization
what are the responsibilities of payroll department
- pay employees accurately and on time #1!!!
- ensure all hours worked are recorded accurately
- protect the company against fraud
- maintain up to date employee documentation
- Ensure total confidentiality of payroll information
- ensure all payroll transactions are recorded accurately for posting to the GL
Many people interact with and are affected by payroll. payroll deals with both internal stakeholders & internal stakeholders
What are internal Stakeholders?
- employees
- require accurate and timely pay and information kept confidential - management
- require accurate collection and reporting payroll info, summary reports for business decisions - accounting
- require accurate summary reports of all GJ entries - Human Resources
- require accurate records of benefit deductions for remittances to insurance companies - attendance records for vacation, sick etc tracking of each employee - IT
- ensures all computerized systems work correctly, are updated when required (year end updates) and system issues are dealt with quickly and efficiently
what are the external stakeholders
- Federal and Provincial Government
- require payroll to accurately withhold statutory deductions
- remit and report by due dates - Unions
- require payroll to accurately deduct & remit union dues
- adhere to collective bargaining agreements - Courts
- require payroll to deduct garnishments as ordered - Insurance Companies
- require payroll to accurately deduct and remit all benefit deductions on a timely basis (often monthly but many are on a per pay basis)
CRA says” taxable benefits should be withheld on a “as enjoyed” basis - Other Vendors
- require accurate deductions and payment of summary information (if charitable donations, RRSP contributions etc)
What skills does payroll personnel require
- Interpersonal Skills
- communicate effectively with people at all levels within and outside the organization - Excellent mathematical skills for all required calculations
- Ability to read and comprehend legislation and collective agreements
- Problem solving, organization skills and high attention to detail for the collection of all information required
- as well as easy retrieval of all stakeholders - flexibility and ability to multi takes
What are the 10 things payroll needs to understand and know
- employment standards act
- federal income tax regulations
- provincial income tax regulations
- how to calculate CPP
- How to calculate EI
- Workers compensation
- Taxable benefits
- How to calculate and remit garnishments to CRA, family responsibility and the courts
- How to calculate and complete government remittances
- how to prepare and balance GJ entries
What are the payroll processing methods
- Manual
- Outsourced
- Purchased Software
- In house developed software
- doesn’t matter what one you use, employer is responsible for ensuring that all calculations are done correctly and third party remittances are made on time
Define manual processing method
- mainly for small payrolls (under 20 employees) with little or no special circumstances
- Recording of all information is done by employee (kept in a payroll journal)
- Gross earnings are calculated for all hrs worked
- Statutory deductions are calculated using manual tables (CPP, EI, Income tax)
- Cheques are handwritten for each employee (recorded in a cheq register for reconciliation at a later time)
- Monthly payroll journal entries are summarize ,balanced and entered into the GL
- Monthly gov. remittances are completed for summarized information
- monthly bank reconciliation of cash cehq is done
- All other monthly remittances (benefits carriers etc) are completed
- it is the company’s responsibility to keep up to date on all legislative changes
- other deductions are withheld to result in net pay for each employee
Describe outsourced
- mainly for med - larg sized companies
- who don’t want to responsibility of managing in house payroll software system - internal responsibilities include
- collection of employee info(forms upon hire, wage increase, hrs worked changes to benefit deductions etc)
- entering GJ entries once received back from vendor
- cheq reconciliation - Vendor responsibilities include:
- calculating payroll
- cutting employee cheques
- creating GJ entries every payroll
- gov. remittances and reporting
- T4s and documentations
- all have a cost - ** it is the vendor’s responsibility to keep
- up to date on all legislation changes but the company’s responsibility to ensure calculations and remittances are correct (it is ultimately the organization’s responsibility to ensure remittances are correct and gov remittances. CRA doesn’t care that your service provide made a mistake
Describe purchased software for payroll
- mainly used for med to lrg sized companies
- who want internal control of their payroll - purchased as a complete system for tracking of employees information, automatic calculation of payroll, creating GJ entries, gov. remittances and year end reporting
- can cost $100 to hundereds of thousands for large co who want integration with their accounting system and all payroll and HR info tracked in the system
- systems can be stand alone on a PC or multi-user on a network
- payroll dept inputs all employee info and payroll info
- companies typically enter into service agreements wit vendors for period updates of software with respect to legislative changes and fucnationality
- It is the vendor’s responsibility to ensure the software will calculate as per all legislative changes but the company’s responsibly to ensure calculations and remittances are correct
- Purchased software can also be considered as “in-house” payroll processing
- because everything is done in the organization
- organization is completely responsible for the outcome of their payroll
- vendor is only responsibly for the software
Describe In House developed software
- mainly used for companies wit unique payroll requirements or complex payrolls
- have it resources capable of creating and implementing a custom system - all responsibilities rest with the co for calculating and remittances
- main draw back is the constant maintenance required for all legislative changes/ updates as well as system problems
What are the 4 groups of employees
- full time
- part time
- casual
- seasonal
Define Full time
work regular hours
- usually 35 - 40 hours /. wk
define part time
- different shifts though out the week
- usually during busy periods to supplement FT workers
- usually 24 hrs/ wk but it can be longer when FT employees are on holidays
Define casual
- hired to perform a specific job for a set period of time
- usually hired to supplement FT workers in busy periods or used to fill in when they are off
Define seasonal
- hired for set period time like summer
- usually FT for the period they are employed
What are the 5 categories of pay
- hourly
- salary
- Piece
- Rate
- Commission
Define Hourly
- paid based on # of hours worked
- includes ft and pt, irregular hrs or shifts
- most time consuming method of collecting and processing payroll
- allows employee - costs to be easily divided up by hr across different work centres or jobs
- time cards, timesheets or electronic means such as swipe systems are used to record hrs worked by the employee
Define Salary
- employees are paid a set amount each pay period, regardless of # of hours worked
- expectation of hours worked are usually laid out in employee offer letter or company handbook
- some special circumstances can exist for executive personnel
- least time consuming method of processing payroll (no or very little collection required for each pay period) unless the employer tracks exceptions such as vacation or sick time
Define Piece rate
- employees are paid per unit they produce, regardless of # hrs worked
- expectation of # of units to produce is usually laid out in an employee offer letter or company handbook
- companies must ensure that employee’s wages adhere to provincial minimum wage legislation regardless of number of units produced
Define Commission
- employees are paid a percentage of what they sell of the company’s products
- mainly used in combination with a salary payroll, as an incentive to increase the employee’s sales volume
- very time consuming method for processing payroll (sales volumes and commission calculations must be verified by management, and are often complex and vary across different product lines as well as month to month sales differentials)
Define contractors
- people who work with the company but are not considered employees
- person is deemed a contractor if no employer/ employee relationship exists. criteria : control, ownership of tools, change of profit/risk of loss and integration with the company
- contractors are paid by submitting an invoice to A.P for services rendered, rather than payroll
Define pay period frequencies
is how often a payroll is calculated and paid to employees. most companies usually only have one pay frequency but some use a combination of pay frequencies based on their requirements.
What are the most common pay frequencies
- weekly
- bi-weekly
- semi-monthly
4 monthly
define paid weekly
paid each week or 52 times per year
define paid bi-weekly
paid every other week or 26 times per year
define paid semi-monthly
paid twice a month or 24 times per year
define paid monthly
paid 12 times per year
what is an important point about pay period frequencies
every 7 years there is an extra week in the year, so weekly is paid 53 times per year and bi-weekly is paid 27 times per year
Why is it so important to determine the pay period frequency
it is very important to use these calculations to arrive at pay period salary amount. it is the only way to get an accurate figure
example: an employee is paid $52,000 per year
What is that weekly
bi-weekly
semi-monthly
monthly
- see note on page important
weekly
$52,000 / 52 or $1,000 per week
Bi-Weekly
$52,000 / 26 or $2,000 bi weekly
Semi Monthly
$52,000 / 24 or $2,166.67
Monthly
$52,00 / 12 or $4,333.333 monthly
what are the categories of pay and frequencies
- Hourly : typically weekly or bi-weekly frequencies
- Salary: typically bi-weekly or semi-monthly frequencies
- Piece Rate: typically weekly or bi-weekly frequencies
- Commission : typically monthly frequencies
- Contractors: typically monthly frequencies or as per ap schedule
What is important about unions with regards to payroll
payroll department must collect and pay union dues, as well as calculation of pays as per collective agreement
What is important about out of province employees with regards to payroll
payroll department must adhere to the employment standards and tax laws for respective provinces
What is important about international employees with regards to payroll
payroll must adhere to the employment standards, tax laws and currency differences for the respective countries
How is communication important for payro9ll
- must be able to effectively communicate with both internal and external stakeholders
- able to effectively read and communicate such things as collective agreements, government legislation and company policy to internal stakeholders (employees and management)
- must be able to communicate with extreme confidentiality to external stakeholders such as the family responsibility office.
What are the categories or types of pay (5)
- hourly
- salary
- piece rate
- commission
- contractors
