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  • 1. Human Resources (HR) Management and Payroll Process
  • 2. 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
  • 3. 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
  • 4. 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
  • 5. 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
  • 6. 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
  • 7. 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 job-related knowledge, skills, attitude, and motivations
      • Human assets include full-time permanent employees, plus part-time 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
  • 8. 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
  • 9. 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
  • 10. Payroll Part of HR Module
    • It is common for payroll to be part of the HR module in software (SAP example)
  • 11. Figure 14.1 on page 512
    • The HR module includes options for both HR and payroll, among others
    • The advantages gained by allowing the two processes to share common data include:
      • Creating a single source for obtaining HR information
      • Providing for faster data access
      • Minimizing data redundancy
      • Ensuring data integrity and consistency
      • Facilitating data maintenance
      • Improving data accuracy
  • 12. Organization Chart of the HR Function
  • 13. Duties of HR Managers
  • 14. Duties of HR Managers
  • 15. Technology Trends and 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 in implementing required HR and payroll functionality.
    • Implementing the HRM process with an enterprise system can help recognize the benefits of integration of the HR management process with other enterprise systems modules such as:
      • Financial Accounting
      • Logistics
      • Sales and Distribution
      • The Workflow Module
  • 16. Implementing the HRM Process
    • Process Inputs: In general, the HR forms in the figure capture information about three HR-related events:
    • (1) selecting employees
    • (2) evaluating employees, and
    • (3) terminating employees
  • 17. Implementing the HRM Process
    • Selecting employees may be initiated in one of two ways:
      • Departmental managers (outside the HR department) may initiate the process to satisfy their immediate hiring needs
      • Selection process may be started by the system automatically
  • 18. Implementing the HRM Process
    • Evaluating employees comprises a multitude of activities
      • Departmental managers and supervisors (again, outside the HR function) usually initiate evaluations or other changes affecting employees
      • The manager of personnel appraisal and development (in HR) typically approves the review and implements such changes
  • 19. Implementing the HRM Process
    • Terminating employees closes the employment process loop
      • Periodically, departmental managers and supervisors (in concert with HR managers) must make difficult decisions about the retention of employees
      • If a termination is necessary, the employee change screen is used to initiate the process of changing an employee’s status from current employee to terminated employee
  • 20. Implementing the HRM Process
    • Processing Logic and Process Outputs.
    • HR requests initiated outside of the HR department are approved within that department and then routed to HR for approval
    • Some data may be entered within HR
    • The employee/payroll master data, skills inventory data, and labor-force planning data within the enterprise database are updated and various reports are made available
    • Several outputs are produced
      • New hire:
        • An employment letter is sent to the employee
        • Selection notice is sent to the department manager
      • Feedback on job performance:
        • Employee review form
      • Termination:
        • Employees are notified of a dismissal through a dismissal letter
        • Termination notice sent to the operating department manager.
  • 21. Implementing the HRM Process
    • HRM process prepares reports for government and non-government entities
      • Payroll reports: employee federal, state, and local taxes
    • HR reports might include those provided to the following:
      • • Unions
      • • Equal Employment Opportunity (EEO)
      • • Occupational Safety and Health Administration (OSHA)
      • • Department of Labor
    • There are also numerous communications to employees of HR-related information
      • Job opening announcements
      • Training information
      • Phone books
      • Benefits literature
      • Policy and procedure manuals, and the like.
    • Many companies have found that such materials can be disseminated effectively and efficiently through an HR portal, which serves as a central data source for such information.
  • 22. HR Management Flowchart
  • 23. 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
  • 24. The Payroll Process
    • Payroll generally falls under the controller’s office with the treasurer participating in distributing paychecks
  • 25. Payroll Process Context Diagram
  • 26. Payroll Process: Level 0 DFD
  • 27.  
  • 28. 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
  • 29. 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)
  • 30. Accounting Entries in Payroll Process
  • 31. Payroll Process Flowchart
  • 32. 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)
  • 33. 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
  • 34. 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
  • 35. 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.
  • 36. Payroll Process Control Matrix