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The New Approach – Payroll Startup Procedures

Author: Steve L. Seawall, CPA Copyright 2015 Custom Micro Works All rights reserved

Revised 4/26/2015

Overview

Getting started with Payroll begins with the Payroll Setup menu. Then it is a matter of setting up each employee with a Payroll personal data record and you are ready to create paychecks.

Suggestion: Focus your attention on the basics at first. As you get more comfortable with the Payroll system we can help you with using additional features like direct deposit, annual leave, and reconciling the Payroll Clearing Fund.

Caution: You will find that it is fairly easy to create paycheck records and print them. In fact, experience has shown that you can easily get over-confident and not pay attention to potential problems.

How to avoid and minimize Payroll Problems:

• DO NOT post Payroll costs to Budgetary Accounting until the day after the checks are issued to the employees.

There is nothing, I mean NOTHING, to be gained by posting to BA sooner, other than potential headaches.

Countless city clerks call technical support and say: “I have a problem with a paycheck.” We ask two questions: 1) Have the checks been issued to the employees?, and 2) Have you posted the paychecks to BA?

They have been warned, but they say, “Sorry, No, and Yes.” Why on earth do you post before you even issue the paychecks. You are simply asking for headaches and extra work.

Enough said. Remember, our advice and suggestions are just trying to save you ten or fifteen minutes of time that we think you need.

• DO NOT attempt to correct Payroll problems without technical support. Invariably you will make the problem worse. The sooner you contact technical support, the sooner your headache will go away.

• As soon as you sense a Payroll problem, get Help.

• Whenever a change is made to an employee’s data record, pay close attention to the Pay Detail record for the employee’s next paycheck, BEFORE it is printed. You need to make sure the change is reflected in the paycheck.

• Make sure you understand the concept of Effective Dating. It is a common feature in any good Payroll system. You can read the related Payroll download document.

• Payroll Adjustments. NA has an extremely sophisticated Payroll Adjustments procedure. This procedure is designed to make corrections to previously issued paychecks, but only for paychecks issued in the current year. Easy as it is to use, we recommend you contact technical support to do Payroll Adjustments.

Setup

• Select PR/Setup.

• General Information. This is just a matter of entering the calendar year.

• Budgetary Accounting Requirements. These setup requirements are needed to help the system translate Payroll costs into expenditure transactions for Budgetary Accounting financial reporting.

• Pay Types. Most of the Pay Types that you will need are provided as default codes. A Pay Type is a code used by the Payroll system to report time worked by an employee. Each employee must be assigned one or more Pay Types when the employee’s personal data record is created.

• Benefits and Deductions. Benefit and Deduction records are used to identify a fringe benefit and/or a deduction that applies to one or more employees.

A fringe benefit represents a benefit to the employee above and beyond the employee’s gross pay (i.e., salaries and wages). At the same time, a fringe benefit represents an additional Payroll cost to the employer above and beyond the employee’s gross pay (i.e., salaries and wages). A good example of a fringe benefit is the employer’s share of social security.

A deduction represents an amount that is subtracted from the employee’s gross pay to arrive at the employee’s net pay (i.e., paycheck amount). A good example of a deduction is the employee’s share of social security.

The Payroll system has two types of Benefit and Deduction records – standard and miscellaneous. The standard Benefit and Deduction records are provided by default. There is no limit on the number of miscellaneous Benefit and Deduction records you can create in the Payroll system.

Each employee is assigned those Benefit and Deduction records that apply to them. Some Benefit and Deduction records might apply to all of your employees, some might apply to a few employees, and some might apply to a single employee.

Employee Personal Data Records

• Select PR/Employee Data.

• Click on Add to create an employee’s personal data record.

Once the employee personal data record is created, you can highlight the employee in the listing and:

1) Make changes to the employee’s personal data by clicking on the Personal Data Tab.

2) Make changes to the Pay Types assigned to the employee by clicking on the Pay Types Tab.

3) Make changes to the Benefit and Deduction records assigned to the employee by clicking on the Benefits and Deductions Tab.

Create Paychecks

• Select PR/Paychecks – Create New and Edit Old Records.

This is the starting point to create a paycheck record.

We will walk you through your first paycheck.

View Paychecks

• Important: Do Not Print Paychecks until you have reviewed all paychecks and feel comfortable there are no payroll errors. When you Print Paychecks 1) the checks are sent directly to the printer (there is no “view window”), and 2) the entire payroll is permanently locked in, preventing you from editing a paycheck if an error is found.

• Select PR/View Paychecks

• Select a Paycheck Issue Date to display those paychecks in the listing.

• Select the Type of Paycheck

• Highlight one or more paychecks in the listing.

• Click on View Pay Detail to view pay detail for the selected paycheck(s).

• Click on Edit Pay Detail to edit pay detail for the selected paycheck(s).

Important: Although you can edit pay detail from this screen, you should not do so without consulting technical support. If there is an error in a paycheck you should correct the error following the guidance provided in the related document for handling paycheck problems.

• Click on View Paychecks. From the “view window” you can see exactly what the checks and stubs will look like.

Note: You can also print the checks from this window on plain sheets of paper. Printing the checks in this way Does Not lock in the payroll because you are in the View Paychecks window. The payroll only gets locked in when you are in the Print Paychecks window (accessed from another menu selection).

Inquiry - Print Pay Detail

• Click on Print Detailed Payroll Register. Review each check for reasonableness, paying particular attention to new employees, and to employees whose personal data records have changed.

Print Paychecks

• Important: Do Not Print Paychecks until you have reviewed all paychecks and feel comfortable there are no payroll errors. When you Print Paychecks 1) the checks are sent directly to the printer (there is no “view window”), and 2) the entire payroll is permanently locked in, preventing you from editing a paycheck if an error is found.

Note: If you have not done so, you should first review all paychecks using the selections PR/View Paychecks.

• Print Both Paper and Electronic Paychecks. You must print both paper paychecks and electronic paychecks. Of course, the paper checks are printed on pre-number paper checks. However, the electronic checks can be printed on plain sheets.

• Are you ready to Print Paychecks? After you have reviewed the Payroll Register and viewed the checks, you should be ready to print the paychecks on real, pre-numbered checks.

• Select PR/Print Paychecks

• Select a Paycheck Issue Date to display those paychecks in the listing.

• Select the Type of Paycheck

• Highlight one or more paychecks in the listing.

• For Paper Paychecks Only: Enter the check number of the first check to be printed.

• For Electronic Paychecks Only: Leave the “check number” blank.

• Click on Print Paychecks

Paycheck Errors Or Problems

• If you discover a paycheck error or problem that you are not sure how to handle, contact Technical Support!

Important: It does not matter whether the paycheck has been printed (and permanently locked in) or not. If you are not sure what to do, call!

The Payroll module has a very sophisticated adjustment feature. It is easier than you think to make corrections to previously issued paychecks.

• If you discover a paycheck error or problem before the check has been printed (and therefore is not permanently locked in) check the following:

Check to make sure you entered the correct hours (Create/Edit Paycheck)

Check the employee’s personal deduction record for errors (i.e., pay types, including rates of pay; benefits and deductions).

Check the effective dates of the pay rates (in employee’s pay type records) and benefits and deductions.

• Handling paycheck problems is discussed in a separate document titled Paycheck Problems.

Special Paycheck Edit Feature

Note: The feature is not recommended without the assistance of technical support.

• The Payroll module has a special “Edit” feature that allows you to edit paycheck detail. To use this feature:

Select PR/View Paychecks

Select a Paycheck Issue Date

Select the Type of Paycheck

Select a paycheck in the listing to highlight it.

Click on Edit Pay Detail

You can change any detail item in the paycheck. Exercise extreme CAUTION when using this feature because there are no computer edits to check for entry errors. Also, if you do a re-calculation of the check before it is printed (using the selection PR/Paychecks – Create New and Edit Old Records), the changes you make using the special Edit feature will be lost!

Running Payroll Costs Through the Payroll System

• What do we mean when we say “running a cost through the payroll system”?

In any payroll system there are two types of payroll costs – 1) salaries and wages, and 2) employer contributions for fringe benefits. Payroll costs for salaries and wages are nothing more or less than the employee’s gross pay. Payroll costs for fringe benefits are above and beyond gross pay and include the employer’s share of social security and medicare, the employer’s share of retirement contributions, the employer’s share of group health insurance, and unemployment tax.

Put simply, if a payroll cost appears in the Payroll system’s cost reports, the cost is being run through the payroll system. If a payroll cost does not appear in the Payroll system’s cost reports, the cost is not being run through the payroll system.

Payroll costs for salaries and wages are 100 percent run through the payroll system because such payments to the employee are taxable. Most, but not necessarily all payroll costs for fringe benefits are run through the payroll system. For example, some cities do not run the employer’s share of group health insurance and unemployment tax through the payroll system.

• What is the significance of running (or not running) payroll costs through the payroll system?

1) Only payroll costs run through the payroll system are “automatically” charged in the Budgetary Accounting system and transferred to the Payroll Clearing Fund. This can potentially cause confusion when making payroll remittance payments if certain payroll costs are not run through the payroll system.

2) Not running all payroll costs through the payroll system makes in more difficult to track payroll costs for budgetary or other purposes. This is important because payroll costs normally are the single largest type of cost in any city.

• Problem: Assume a city has two employees. The group health insurance premium for each employee is $300 per month. The city picks up $200 each month as a fringe benefit and the other $100 is deducted in advance from the employee’s paychecks for the preceding month. Assume further that the city does not run the employer contribution for the fringe benefit through the payroll system.

At the beginning of each month the city clerk prepares to pay the group health insurance premiums. The invoice will be charged as follows: 1) Payroll Clearing Fund $200 ($100 deducted from each employee’s paycheck and transferred to the Payroll Clearing Fund the prior month), 2) General Fund $200 ($200 for the employer’s share for the city clerk), and 3) Water Fund $200 ($200 for the employer’s share for the utility worker).

Important: If the employer contribution for the fringe benefit was run through the payroll system, the entire payment could simply be charged to the Payroll Clearing Fund.

• Recommendation: Generally you can save yourself time in the long run by running all payroll costs through the payroll system. It is a fairly simple matter in the payroll system to set up employer contributions for fringe benefits. And they normally only have to be changed when the rates change (i.e., new effective dated record created).

• Exceptions to the Recommendation. Notwithstanding the recommendation to run all payroll costs through the payroll system, you might find instances in which it is a lot simpler to pay for certain payroll related costs as if they are a non-payroll expenditure.

Such exceptions should normally meet a couple of criteria: 1) the fringe benefit does not have any impact on the employee’s taxable income, and 2) the fringe benefit is solely an employer contribution and not related to any deductions.

Experience has shown at least a couple of instances in which a fringe benefit is not run through the payroll system. One instance is for federal and state unemployment taxes. The other is for group health insurance in which the city is picking up 100 percent of the cost.

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