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Payroll Procedures [1]

Payroll Procedures

A payroll procedure is a written statement that itemizes the reason for an activity, notes who is responsible for it, and describes exactly how the activity is to be completed. It is highly applicable to the payroll function, which is full of activities that must be completed the same way, every time.

The first step in creating a set of payroll procedures is to construct a flowchart of the overall process, so that you can identify all activities, thereby ensuring that a procedure is written for each one. Also, each box in the flowchart contains an identifying index number for each procedure, which is later listed as the procedure number in the header for each procedure. Thus, you can first refer to a process flowchart for the specific procedure needed and then trace the index number to the detailed procedure. A sample payroll process flowchart is as shown in Exhibit 3.1.

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Exhibit 3.1: Payroll Process Flowchart

The remainder of this section contains six payroll procedures that correspond to the activities noted on the payroll process flowchart. For consistency, they all have exactly the same format. The header contains a notation box on the right side that lists an index (or retrieval) number, the page number, the date on which the procedure was created, and the index number of any procedure that it has replaced. The main body of the procedure is in three sections: the "Purpose and Scope" section summarizes what the procedure is all about; the "Responsibilities" section itemizes which job positions must follow the procedure; and the "Procedures" section lists the exact steps to follow.

The procedures used here are designed for specific software packages and company procedures, hence are not meant to be copied; rather, they should be reviewed to grasp the general layout and terminology used in each procedure, and then used to design a customized set of procedures for the specific circumstances. Specific payroll procedures, shown in the preceding flowchart, are described individually throughout the remainder of this section.

[1]The flowchart and procedures used in this section were adapted with permission from Chapter 5 of Steven Bragg and Harry L. Brown, Design and Maintenance of Accounting Manuals, 4th Ed. (New York: John Wiley & Sons, Inc., 2002).



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