Annual Paperwork Reminders There are several documents that the payroll department must issue or process at the end of a calendar year. Place the following paperwork-related items on the payroll activities calendar so they are not forgotten: Remind employees to review their ... [full story]

Asset Purchases Asset Purchases An employer may allow its employees to either purchase assets from the company or through it. In the first case, the company may be liquidating assets and so offers to sell them to its employees. In the latter ... [full story]

Automate Fax-Back of Payroll Forms A payroll clerk is the unofficial keeper of the payroll and human resources forms. Employees come to this person to collect these sheets, which can vary from a request to change a payroll deduction to a ... [full story]

Automate Vacation Accruals The accounting topic that is of the most interest to the greatest number of employees is how much vacation time they have left. In most companies, this information is kept manually by the payroll staff, meaning that employees ... [full story]

Avoid Job Costing through the Payroll System Some controllers have elaborate cost accounting systems set up to accumulate a variety of costs from many sources, sometimes to be used for activity-based costing and, more frequently, for job costing. One of these ... [full story]

Back Pay Back Pay Back pay is frequently paid to an employee as part of an arbitration award, perhaps related to an unjustified termination or an incorrectly delayed wage increase. Whatever the reason for the back pay, it should be treated as ... [full story]

Business Expense Reimbursements If an employee submits substantiation of all expenses for which reimbursement is requested, then the corresponding payment from the employer to the employee is not considered income to the employee. Substantiation can take the following forms: A receipt that ... [full story]

Cafeteria Plans A cafeteria plan allows employees to pay for some benefits with pretax dollars, so that the amount of taxable income to them is reduced. In its simplest form, a Premium-Only Plan (POP) allows employees to take employer-required medical insurance ... [full story]

Cash Payments Though cash payments are still used, this practice tends to be limited to day laborers who work for short periods. It is not a recommended payment approach, as it requires a considerable amount of labor to calculate and distribute ... [full story]

Charitable Contributions Many employers encourage their employees to give regular contributions to local or national charities, of which the United Way is the most common example. Employers typically have employees sign a pledge card that authorizes certain amounts to be deducted ... [full story]

Check Payments Check Payments A far more common method for paying employees is to create a check payment for each one. It is increasingly rare to see a company manually calculate and create payroll checks, since very inexpensive software can be purchased ... [full story]

Child Support Payments The payroll manager will almost certainly see court-ordered child support withholding orders at some point during his or her career. Tightly enforced federal laws help to track down parents who are not making support payments; these laws also ... [full story]

Club Memberships Club dues are taxable income to the employee, except for that portion of the dues that are business related, which must be substantiated. Clubs that fall into this category are airline and hotel clubs, as well as golf, athletic, ... [full story]

Commissions An employee earns a commission when he or she secures a sale on behalf of a business. The commission may be earned when an invoice is issued or when cash is received from the customer. The commission calculation may be ... [full story]

Computing Pay under the Hourly Rate Plan The hourly rate plan is by far the most common method for calculating wages for hourly employees. This involves simply multiplying the wage rate per hour times the number of hours worked during the ... [full story]

Computing Pay under the Piece-Rate Plan The piece-rate pay plan is used by companies that pay their employees at least in part based on the number of units of production completed. To calculate wages under this method, multiply the rate paid ... [full story]

Consolidate Payroll Systems A company that grows by acquisition is likely to have a number of payroll systems—one for each company it has acquired. This situation may also arise for highly decentralized organizations that allow each location to set up its ... [full story]

Creating the Personnel File Creating the Personnel File When a new employee starts work, either the human resources or payroll staff should create a personnel folder in which all employee-related documents are stored. This folder should be capable of holding several hundred ... [full story]

Data Collection Methods In most cases, a company's total direct labor cost is not so high that it warrants the creation of an elaborate data collection system. Instead, you can either focus on a simple system that collects only the most ... [full story]

Deduction of Prior Pay Advances Employees who require more cash than they earn on their normal pay-checks sometimes ask their employers for an advance on their pay. The need may be nonbusiness-related, such as a sudden medical crisis or to purchase ... [full story]

Deposit Payroll Into Credit Card Accounts Some companies employ people who, for whatever reason, either are unable to set up personal bank accounts or do not choose to. In these cases, they must take their paychecks to a check-cashing service, which ... [full story]

Direct Deposit Payments Direct Deposit Payments Direct deposit is the most prevalent method for paying employees. It involves the direct transfer of funds from the company payroll account to the personal savings or checking accounts of its employees. By doing so, employees ... [full story]

Disallow Prepayments Many employees do not have the monetary resources to see them through until the next payday. Their solution is to request a pay advance, which is deducted from their next paycheck. It is a humane gesture on the part ... [full story]

Education Reimbursement The reimbursement of an employee's educational expenses by the employer is not income to the employee if the education being reimbursed is related to his or her current job and will either serve to maintain or improve the person's ... [full story]

Eliminate Personal Leave Days A common task for the payroll staff is to either manually or automatically track the vacation time employees earn and use. Depending on the level of automation, this task can require some portion of staff time every ... [full story]

Employee Achievement Awards Employee achievement awards can be excluded from employee gross income, but only if the awards are tangible property, given in recognition of length of service with the business or for safety achievement and as part of a meaningful ... [full story]

Employee or Contractor Status A key compensation issue is whether someone is an employee or a contractor, since the reporting of income to the IRS varies considerably for each one, as do the tax withholding requirements of the employer. The defining ... [full story]

Employee Portion of Insurance Expenses Employee Portion of Insurance Expenses Most businesses offer some form of medical and related insurance to their employees. This can include medical, dental, vision, short-term disability, long-term disability, life, and supplemental life insurance coverage. An employer may ... [full story]

Employer's Annual Tip Income Tax Return An employer is required to submit a Form 8027, "Employer's Annual Information Return of Tip Income and Allocated Tips," to the IRS no later than February 28 of each year following the reporting calendar year. ... [full story]

Employer's Quarterly Federal Tax Return Employer's Quarterly Federal Tax Return Form 941 must be filed by employers on a quarterly basis with the federal government. This form identifies the amount of all wages on which taxes were withheld, the amount of taxes ... [full story]

Federal Income Taxes An employer is required by law to deduct income taxes from employee pay. If it uses a payroll supplier, then the calculation of the appropriate income tax amounts is completely invisible to it, since the supplier handles this ... [full story]

Federal Tax Deposit Penalties The IRS imposes significant penalties if a business does not make its tax deposits on time, makes insufficient deposits, or does not use the EFTPS electronic filing system when it is required to do so. Its penalty ... [full story]