Payroll Procedures

by Marquis Codjia ; Updated September 26, 2017

Human resources management procedures are important policies that allow companies to improve worker performance in the short and long terms. Payroll guidelines are integral components of these procedures, enabling organizations to compensate personnel in accordance with top management's recommendations and industry practices. These guidelines also help firms gauge labor costs for full-time and part-time personnel.

Identification

Payroll procedures are controls, methodologies and policies that department heads and segment chiefs establish to ensure that corporate pay practices conform to regulatory guidelines. Drawing on corporate human resources policies, these procedures enable organizations to monitor direct and indirect labor expenses, including costs incurred in manufacturing activities. Controls are stipulations that top leadership sets to prevent fraud, errors and technological weaknesses in payroll processing activities. Payroll procedures help companies avert negative regulatory decisions, such as fines and nonmonetary penalties.

Types

Payroll procedures may differ depending on corporate personnel and business requirements, according to the City of New York's Office of the Comptroller. Policies concerning permanent, full-time employees include pay period cutoff dates, pay dates and advance notice requirements before picking up checks in the payroll office. For hourly personnel, payroll procedures relate to pay frequency and authorizations for overtime work.

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Significance

With payroll procedures, all organizations — including businesses, nonprofits and government agencies — can monitor pay information by department, business segment and division. Monitoring labor costs is a key exercise that helps top management in hiring and personnel termination decisions. Labor costs are administrative expenses, and as such, reduce a company's income and return-on-equity indicator. ROI provides insight a firm's ability to generate revenues from operating activities and equals net income divided by shareholders' equity.

Regulatory Compliance

Companies establish payroll procedures to ensure that personnel receive compensation in accordance with state and federal regulatory guidelines, market rates and industry practices. These guidelines include U.S. Department of Labor directives and Occupational Safety and Health Administration stipulations. For example, a U.S.-based tire manufacturer will put into place adequate payroll and compensation policies to ensure that factory personnel receive overtime payments when their weekly shifts exceed the usual 40-hour-per-cycle schedule.

Timesheet Information

A typical employee timesheet includes information such as personnel identification number, employee first and last names, pay date and business segment, according to the Whitman College's Payroll Procedures handbook. The timesheet also incorporates data such as staff position code, hourly rate, general ledger account number and name, daily hours, employee signature and supervisor's confirmation. A general ledger is an accounting form in which bookkeepers record transactions by debiting and crediting financial accounts, such as assets, liabilities, expenses, revenues and equity items.

About the Author

Marquis Codjia is a New York-based freelance writer, investor and banker. He has authored articles since 2000, covering topics such as politics, technology and business. A certified public accountant and certified financial manager, Codjia received a Master of Business Administration from Rutgers University, majoring in investment analysis and financial management.

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