Unit 1: intro to payroll

Question 1

define payroll

Answer 1

is the process of paying the employees working for your organization in exchange for services rendered

Question 2

Define Payroll professionals

Answer 2

• have many responsibilities
• deal with internal customers (stakeholders) and external agencies
• have to know many statutory and contractual obligations (these rules change frequently, gov. legislation and new collective agreements)

Question 3

If payroll is not processed in compliance with government legislation what can happen

Answer 3

the employer could be liable for substantial fines, interest and penalties

Question 4

What can payroll refer to?

Answer 4

1. department that administers payroll
2. a list of person to be paid and amount due to each
3. total wages and salaries paid out in a year
4. total number of people employed by an organization

Question 5

what are the responsibilities of payroll department

Answer 5

1. pay employees accurately and on time #1!!!
2. ensure all hours worked are recorded accurately
3. protect the company against fraud
4. maintain up to date employee documentation
5. Ensure total confidentiality of payroll information
6. ensure all payroll transactions are recorded accurately for posting to the GL

Question 6

Many people interact with and are affected by payroll. payroll deals with both internal stakeholders & internal stakeholders
What are internal Stakeholders?

Answer 6

1. employees
   - require accurate and timely pay and information kept confidential
2. management
   - require accurate collection and reporting payroll info, summary reports for business decisions
3. accounting
   - require accurate summary reports of all GJ entries
4. Human Resources
   - require accurate records of benefit deductions for remittances to insurance companies - attendance records for vacation, sick etc tracking of each employee
5. IT
   - ensures all computerized systems work correctly, are updated when required (year end updates) and system issues are dealt with quickly and efficiently

Question 7

what are the external stakeholders

Answer 7

1. Federal and Provincial Government
   - require payroll to accurately withhold statutory deductions
   - remit and report by due dates
2. Unions
   - require payroll to accurately deduct & remit union dues
   - adhere to collective bargaining agreements
3. Courts
   - require payroll to deduct garnishments as ordered
4. Insurance Companies
   - require payroll to accurately deduct and remit all benefit deductions on a timely basis (often monthly but many are on a per pay basis)
   CRA says” taxable benefits should be withheld on a “as enjoyed” basis
5. Other Vendors
   - require accurate deductions and payment of summary information (if charitable donations, RRSP contributions etc)

Question 8

What skills does payroll personnel require

Answer 8

1. Interpersonal Skills
   - communicate effectively with people at all levels within and outside the organization
2. Excellent mathematical skills for all required calculations
3. Ability to read and comprehend legislation and collective agreements
4. Problem solving, organization skills and high attention to detail for the collection of all information required
   - as well as easy retrieval of all stakeholders
5. flexibility and ability to multi takes

Question 9

What are the 10 things payroll needs to understand and know

Answer 9

1. employment standards act
2. federal income tax regulations
3. provincial income tax regulations
4. how to calculate CPP
5. How to calculate EI
6. Workers compensation
7. Taxable benefits
8. How to calculate and remit garnishments to CRA, family responsibility and the courts
9. How to calculate and complete government remittances
10. how to prepare and balance GJ entries

Question 10

What are the payroll processing methods

Answer 10

1. Manual
2. Outsourced
3. Purchased Software
4. In house developed software
   - doesn’t matter what one you use, employer is responsible for ensuring that all calculations are done correctly and third party remittances are made on time

Question 11

Define manual processing method

Answer 11

1. mainly for small payrolls (under 20 employees) with little or no special circumstances
2. Recording of all information is done by employee (kept in a payroll journal)
3. Gross earnings are calculated for all hrs worked
4. Statutory deductions are calculated using manual tables (CPP, EI, Income tax)
5. Cheques are handwritten for each employee (recorded in a cheq register for reconciliation at a later time)
6. Monthly payroll journal entries are summarize ,balanced and entered into the GL
7. Monthly gov. remittances are completed for summarized information
8. monthly bank reconciliation of cash cehq is done
9. All other monthly remittances (benefits carriers etc) are completed
10. it is the company’s responsibility to keep up to date on all legislative changes
11. other deductions are withheld to result in net pay for each employee

Question 12

Describe outsourced

Answer 12

1. mainly for med - larg sized companies
   - who don’t want to responsibility of managing in house payroll software system
2. internal responsibilities include
   - collection of employee info(forms upon hire, wage increase, hrs worked changes to benefit deductions etc)
   - entering GJ entries once received back from vendor
   - cheq reconciliation
3. Vendor responsibilities include:
   - calculating payroll
   - cutting employee cheques
   - creating GJ entries every payroll
   - gov. remittances and reporting
   - T4s and documentations
   - all have a cost
4. ** it is the vendor’s responsibility to keep
   - up to date on all legislation changes but the company’s responsibility to ensure calculations and remittances are correct (it is ultimately the organization’s responsibility to ensure remittances are correct and gov remittances. CRA doesn’t care that your service provide made a mistake

Question 13

Describe purchased software for payroll

Answer 13

1. mainly used for med to lrg sized companies
   - who want internal control of their payroll
2. purchased as a complete system for tracking of employees information, automatic calculation of payroll, creating GJ entries, gov. remittances and year end reporting
3. can cost $100 to hundereds of thousands for large co who want integration with their accounting system and all payroll and HR info tracked in the system
4. systems can be stand alone on a PC or multi-user on a network
5. payroll dept inputs all employee info and payroll info
6. companies typically enter into service agreements wit vendors for period updates of software with respect to legislative changes and fucnationality
7. It is the vendor’s responsibility to ensure the software will calculate as per all legislative changes but the company’s responsibly to ensure calculations and remittances are correct
8. Purchased software can also be considered as “in-house” payroll processing
   - because everything is done in the organization
   - organization is completely responsible for the outcome of their payroll
   - vendor is only responsibly for the software

Question 14

Describe In House developed software

Answer 14

1. mainly used for companies wit unique payroll requirements or complex payrolls
   - have it resources capable of creating and implementing a custom system
2. all responsibilities rest with the co for calculating and remittances
3. main draw back is the constant maintenance required for all legislative changes/ updates as well as system problems

Question 15

What are the 4 groups of employees

Answer 15

1. full time
2. part time
3. casual
4. seasonal

Question 16

Define Full time

Answer 16

work regular hours

- usually 35 - 40 hours /. wk

Question 17

define part time

Answer 17

• different shifts though out the week
• usually during busy periods to supplement FT workers
• usually 24 hrs/ wk but it can be longer when FT employees are on holidays

Question 18

Define casual

Answer 18

• hired to perform a specific job for a set period of time

- usually hired to supplement FT workers in busy periods or used to fill in when they are off

Question 19

Define seasonal

Answer 19

• hired for set period time like summer

- usually FT for the period they are employed

Question 20

What are the 5 categories of pay

Answer 20

1. hourly
2. salary
3. Piece
4. Rate
5. Commission

Question 21

Define Hourly

Answer 21

• paid based on # of hours worked
• includes ft and pt, irregular hrs or shifts
• most time consuming method of collecting and processing payroll
• allows employee - costs to be easily divided up by hr across different work centres or jobs
• time cards, timesheets or electronic means such as swipe systems are used to record hrs worked by the employee

Question 22

Define Salary

Answer 22

• employees are paid a set amount each pay period, regardless of # of hours worked
• expectation of hours worked are usually laid out in employee offer letter or company handbook
• some special circumstances can exist for executive personnel
• least time consuming method of processing payroll (no or very little collection required for each pay period) unless the employer tracks exceptions such as vacation or sick time

Question 23

Define Piece rate

Answer 23

• employees are paid per unit they produce, regardless of # hrs worked
• expectation of # of units to produce is usually laid out in an employee offer letter or company handbook
• companies must ensure that employee’s wages adhere to provincial minimum wage legislation regardless of number of units produced

Question 24

Define Commission

Answer 24

• employees are paid a percentage of what they sell of the company’s products
• mainly used in combination with a salary payroll, as an incentive to increase the employee’s sales volume
• very time consuming method for processing payroll (sales volumes and commission calculations must be verified by management, and are often complex and vary across different product lines as well as month to month sales differentials)

Question 25

Define contractors

Answer 25

• people who work with the company but are not considered employees
• person is deemed a contractor if no employer/ employee relationship exists. criteria : control, ownership of tools, change of profit/risk of loss and integration with the company
• contractors are paid by submitting an invoice to A.P for services rendered, rather than payroll

Question 26

Define pay period frequencies

Answer 26

is how often a payroll is calculated and paid to employees. most companies usually only have one pay frequency but some use a combination of pay frequencies based on their requirements.

Question 27

What are the most common pay frequencies

Answer 27

1. weekly
2. bi-weekly
3. semi-monthly
   4 monthly

Question 28

define paid weekly

Answer 28

paid each week or 52 times per year

Question 29

define paid bi-weekly

Answer 29

paid every other week or 26 times per year

Question 30

define paid semi-monthly

Answer 30

paid twice a month or 24 times per year

Question 31

define paid monthly

Answer 31

paid 12 times per year

Question 32

what is an important point about pay period frequencies

Answer 32

every 7 years there is an extra week in the year, so weekly is paid 53 times per year and bi-weekly is paid 27 times per year

Question 33

Why is it so important to determine the pay period frequency

Answer 33

it is very important to use these calculations to arrive at pay period salary amount. it is the only way to get an accurate figure

Question 34

example: an employee is paid $52,000 per year

What is that weekly
bi-weekly
semi-monthly
monthly

• see note on page important

Answer 34

weekly
$52,000 / 52 or $1,000 per week

Bi-Weekly
$52,000 / 26 or $2,000 bi weekly

Semi Monthly
$52,000 / 24 or $2,166.67

Monthly

  $52,00 / 12 or $4,333.333 monthly

Question 35

what are the categories of pay and frequencies

Answer 35

1. Hourly : typically weekly or bi-weekly frequencies
2. Salary: typically bi-weekly or semi-monthly frequencies
3. Piece Rate: typically weekly or bi-weekly frequencies
4. Commission : typically monthly frequencies
5. Contractors: typically monthly frequencies or as per ap schedule

Question 36

What is important about unions with regards to payroll

Answer 36

payroll department must collect and pay union dues, as well as calculation of pays as per collective agreement

Question 37

What is important about out of province employees with regards to payroll

Answer 37

payroll department must adhere to the employment standards and tax laws for respective provinces

Question 38

What is important about international employees with regards to payroll

Answer 38

payroll must adhere to the employment standards, tax laws and currency differences for the respective countries

Question 39

How is communication important for payro9ll

Answer 39

1. must be able to effectively communicate with both internal and external stakeholders
2. able to effectively read and communicate such things as collective agreements, government legislation and company policy to internal stakeholders (employees and management)
3. must be able to communicate with extreme confidentiality to external stakeholders such as the family responsibility office.

Question 40

What are the categories or types of pay (5)

Answer 40

1. hourly
2. salary
3. piece rate
4. commission
5. contractors