Accounting information systems ch14

Human Resources (HR) Management and Payroll Process Learning Objectives • Know the definition and basic functions of the HR management and payroll processes • Recognize the relationship between the HR management and payroll processes and their environment • Comprehend the relationship between the HR management and payroll processes and management decision making • Understand the logical and physical characteristics of the HR management and payroll processes • Become familiar with some of the technology used to implement the HR management and payroll processes • Know some of the plans commonly used to control the payroll process HR Management and Payroll Processes HR/P Spoke in the AIS Wheel • • • • In this chapter, we spotlight the human resources (HR) management and payroll processes It will become clear later why we depict these processes with one spoke in the AIS wheel We will describe the various users of the HR management and payroll processes, each having their own view of the enterprise system and enterprise database In addition, we will analyze the process controls related to the payroll process Synopsis • Human capital management (HCM), the process of managing how people are hired, developed, assigned, motivated and retained, presumes that employees reflect a strategic investment, rather than an administrative cost • Some estimates place the value of human capital between $500,000 and $5 million per person • Costs of such human capital, including compensation, benefits, and HR, represent 43 percent of the average corporation’s total operating expense Synopsis • The automation of HR (dubbed “e-HR”) may transform HR from a cost center to a highly valued, strategic, mission-critical part of the business • HR automation will affect evaluation and compensation programs to reflect the changing work patterns, including: – – – – – – graying workforce virtual teams telecommuters consultants contractors part-time and temporary employees Synopsis • In this chapter we explore three themes: First, we briefly examine the importance of people to the success of any organization Next, we describe how the HR management and payroll processes assist management in leveraging its human capital Finally, we introduce some of the technology used to implement modern HR management and payroll processes Process Definition and Functions • • • Personnel management started by handling payroll and personnel administration, but evolved by adding functions to handle recruiting, employee relations, and so on HRM still viewed personnel as something that could be controlled HCM philosophy is based on three major principles: An individual’s value to an organization is derived from his/her jobrelated knowledge, skills, attitude, and motivations Human assets include full-time permanent employees, plus parttime employees, temporary employees, and independent contractors • With supply chain management, an organization’s human assets could include employees of suppliers, sales channel partners, and customers A person’s relationship with an organization, from hiring through termination, must be nurtured and managed to obtain maximum lifetime value Definition of HR Management Process • Primary function of the HRM process is to create information flows that support the following: Repetitive work routines of the HR department Decision needs of those who manage the HR department • The HRM process supports the work routines of the HR department and provides information for management decisions by: – Capturing, recording, and storing data concerning HR activities – Generating a variety of HR forms and documents – Preparing management reports – Preparing governmental reports The Payroll Process • Many companies often merge payroll and HR • The payroll process maintains records of payroll taxes, fringe benefits, attendance/absence, time worked and employee paychecks • The payroll process is generally automated because computers are much faster at handling the repetitive computations necessary (payroll is also the most frequently outsourced application in accounting) • Current HR software reaches far beyond simply doing payroll and includes: – Benefits admin, applicant tracking/processing, skills inventories and compliance reporting • Much of HRM is NOT captured by GAAP – But accountants must recognize the immense value of human capital and its affect on the long-term financial health of the organization Payroll Part of HR Module • It is common for payroll to be part of the HR module in software (SAP example) 10 HR Management Flowchart 22 Key Data Tables in the HR Process • Though the flowchart shows only one data store, multiple database tables are contained: – Employee/payroll master data – Labor-force planning data • Staffing requirements • Skills required • Turnover data – Skills inventory data 23 The Payroll Process • Payroll generally falls under the controller’s office with the treasurer participating in distributing paychecks 24 Payroll Process Context Diagram 25 Payroll Process: Level DFD 26 27 Payroll Data and Flows • Tax rates data – Contains current tax rates (federal, state, county and city) for employee withholding and employer accruals • Attendance time record – Lists hours employee are at the job site available for work; usually kept on time card • Job time records – Start and stop times for particular jobs for direct labor distribution 28 Federal Payroll Tax Reports • • • • 941 (report of FICA taxable wages) W-2 (employee wage and tax statement) 1099 (reports non-salary income) Employee Retirement Income Security Act (ERISA) reports (reports on private pension fund assets management) 29 Accounting Entries in Payroll Process 30 Payroll Process Flowchart 31 Payroll Has High Fraud Potential • Types of payroll frauds: – Ghost employees (employees who don’t exist but are issued paychecks) – Falsified hours (employees who overstate hours worked) – Commission schemes (collecting commissions on false sales or using false commission rate) – Worker’s comp schemes (faking injury to receive compensation) 32 Payroll System Controls • Segregation of duties between HR (employee record creation), payroll (prepares payroll) and AP/cashier (disburses cash) • Direct deposit (eliminates opportunity for check fraud) • Review of employee master data for duplicate names and/or social security numbers • Comparison of actual payroll to budget 33 Reimbursement Fraud • Reimbursement for employee business expenses often clear the payroll system – Claiming personal expenses as business related – Altering receipts to increase expenses – Submitting false receipts – Submitting same expense multiple times 34 Payroll Process Control Matrix Legend: A = Provide employees with timely paychecks B = Provide timely filing of tax returns and other reports to government agencies C = Comply with requirements of payroll and tax laws and regulations 35 Payroll Process Control Matrix 36 ... Developments • HR self service systems • Organizations might outsource other functions to support HR management processes – Web-based collaboration – Payroll • Enterprise systems play a major role... benefits of integration of the HR management process with other enterprise systems modules such as: – – – – Financial Accounting Logistics Sales and Distribution The Workflow Module 15 Implementing... communications to employees of HRrelated information – – – – – • Payroll reports: employee federal, state, and local taxes Job opening announcements Training information Phone books Benefits literature