Link
Payroll Changes to Employee Events
There are many payroll changes that must be made to an
employee's file when certain events occur. Many of these changes are never made,
however, either because the payroll staff is so busy with the standard, daily
processing of information that it has no time to address them or because the payroll staff does not possess
enough knowledge to link the payroll changes to the employee events. For
example, when an employee is married, this should trigger a change in that
person's W-4 form, so that the amount of taxes withheld will reflect those for a
married person.
Automation can create many of these linkages. Here are some
examples:
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As soon as an employee reaches the age of 55, the system
issues a notification to the pension manager to calculate the person's potential
pension, while also notifying the employee of his or her pension eligibility.
These notifications can be by letter, but a linkage between the payroll system
and the e-mail system could result in more immediate notification.
-
As soon as an employee has been with a company for 90 days,
his or her period of probation has been completed. The system should then
automatically include the employee in the company's dental, medical, and
disability plans, and start deductions for these amounts from the person's
paycheck. Similarly, the system can automatically enroll the employee in the
company's 401 (k) plan and enter that deduction in the payroll system. Since
these pay changes should not come as a surprise to the employee, the system
should also generate a message to the employee, detailing the changes made and
the net payroll impact.
-
When a company is informed of an employee's marriage, the
computer system generates a notice to the employee that a new W-4 form should be
filled out, as well as a new benefit enrollment form, in case the employee
wishes to add benefits for the spouse or any children. Finally, a notification
message can ask the employee if he or she wants to change the beneficiary's name
on the pension plan to that of the spouse.
-
When an employee notifies the company of an address change,
the system automatically notifies all related payroll and benefit suppliers, such as the 401 (k) plan
administrator and health insurance provider, of the change.
-
When a new employee is hired, the system sends a message to
the purchasing department, asking that business cards be ordered for the person.
Another message goes to the information systems department, requesting that the
appropriate levels of system security be set up for the new hire. Yet another
message goes to the training department, asking that a training plan be set up
for the new employee.
Many of these workflow features are available on high-end
accounting and human resources software packages. However, this software costs
more than a million dollars in most cases, and so is well beyond the purchasing
capability of many smaller companies. An alternative is to customize an existing
software package to include these features, but the work required will be
expensive. Accordingly, these changes should only be contemplated if there are
many employees, since this would result in a sufficient volume of savings to
justify the added expense.
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