Human Resources (HR) Management and Payroll Process - PowerPoint PPT Presentation

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Human Resources (HR) Management and Payroll Process


Human Resources (HR) Management and Payroll Process Learning Objectives Know the definition and basic functions of the HR management and payroll processes Recognize ... – PowerPoint PPT presentation

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Title: Human Resources (HR) Management and Payroll Process

Human Resources (HR) Management and Payroll
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
  • 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
  • Become familiar with some of the technology used
    to implement the HR management and payroll
  • 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

  • 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 corporations total
    operating expense

  • The automation of HR (dubbed e-HR) may
    transform HR from a cost center to a highly
    valued, strategic, mission-critical part of the
  • 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

  • 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

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
  • An individuals 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 organizations
    human assets could include employees of
    suppliers, sales channel partners, and customers
  • A persons 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
  • 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)

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
  • Providing for faster data access
  • Minimizing data redundancy
  • Ensuring data integrity and consistency
  • Facilitating data maintenance
  • Improving data accuracy

Organization Chart of the HR Function
Duties of HR Managers
Duties of HR Managers
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
  • 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

Implementing the HRM Process
  • Process Inputs In general, the HR forms in the
    figure capture information about three HR-related
  • (1) selecting employees
  • (2) evaluating employees, and
  • (3) terminating employees

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

Implementing the HRM Process
  • Evaluating employees comprises a multitude of
  • 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

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
  • If a termination is necessary, the employee
    change screen is used to initiate the process of
    changing an employees status from current
    employee to terminated employee

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
  • 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.

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
  • Unions
  • Equal Employment Opportunity (EEO)
  • Occupational Safety and Health Administration
  • 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.

HR Management Flowchart
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

The Payroll Process
  • Payroll generally falls under the controllers
    office with the treasurer participating in
    distributing paychecks

Payroll Process Context Diagram
Payroll Process Level 0 DFD
(No Transcript)
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

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

Accounting Entries in Payroll Process
Payroll Process Flowchart
Payroll Has High Fraud Potential
  • Types of payroll frauds
  • Ghost employees (employees who dont exist but
    are issued paychecks)
  • Falsified hours (employees who overstate hours
  • Commission schemes (collecting commissions on
    false sales or using false commission rate)
  • Workers comp schemes (faking injury to receive

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
  • Review of employee master data for duplicate
    names and/or social security numbers
  • Comparison of actual payroll to budget

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

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.
Payroll Process Control Matrix
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