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Current Payroll Systems
Payroll System
Very few things, if any, matter more to an employee of an organization than the wages that he or she receives. ... In many instances, management’s creditability is at stake based upon the payroll distribution system that it employs. Payroll systems have undergone gradual evolutionary process overtime and have been changed and affected through historical changes. “There is no single way to do payroll. ... Through technological innovation and economic analysis, constant improvements and innovations have been introduced to update payroll systems to be more effective and efficient. ... Many times, one of the single most costly items in the administrative operating expenses is the payroll of the employees. ... Furthermore, payroll cost is an expense that carries an enormous amount of risk as far as high overhead costs associated with payroll and possible fraud or human error.
There are many fine details and potential complications with the payroll that require continual managerial attention and control. The payroll processing function can be categorized into three primary steps: data input, information processing, and payment distribution to the employees. ... Beyond that point, the processing system becomes increasingly complicated, whereby it is imperative for the accounting staff to correctly “relate employee accomplishment to payroll cost” (Cadmus 107). In order to understand the complications and solution of the payroll process, one has to understand the function of each step along the way.
Payroll Data Input:
This step enters information from a variety of sources into the payroll software for later calculations (Bragg 223). ...
Other information that is processed and adds to the complexity of the payroll processing system are items such as bonuses and commissions, tax deductions, pensions, pay rate changes, and the addition or deletion of new or departing employees. ... The payroll process is particularly vulnerable to fraud such as adding additional hours and commissions. ... Another option that is frequently used is to purchase the services of an outside payroll service to handle the processing and distribution of the payroll process. ...
In summary, the traditional payroll system is one that is complicated and requires a substantial allocation of resources. ... “The volume of clerical work, the possibility of fraud, and the variety of methods of payment which are inherent in the payroll function” can add up to be a substantial expense on the accounting books and requires additional employees to master the volume and responsibility of the task (Cadmus, 122)
Improved accounting Systems
Traditionally, the payroll process requires a large staff to enter the relevant information. Since the payroll process can add up to substantial costs, many world class companies have set as an objective to reduce the costs of payroll transactions. By comparison, “the cost of payroll transaction in a world class company is $1. ... Thus, it is possible to reduce the payroll cost substantially by revising the current system to a “Value Added Analysis” system.
This system is employed by analyzing all of the activities that are associated with payroll. ... In contrast, the printing of the payroll checks takes approximately ten minutes and is classified as a value adding activity. ...
Listed below are three common problems with the traditional payroll systems.
• One example of a problem in the payroll system is the number of people that handle deduction entries before it is fed into the system. ... The human resource department then submits this choice to the payroll department which calculates the deductions that the employee might have. ... The payroll staff needs to constantly monitor and track these costs which increase the work load of the clerks and the general ledger clerk in particular, since he or she would have to make a journal entry for every repayment.
Approximate Word count = 2858
Approximate Pages = 11.4
(250 words per page double spaced)
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