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Accounting Best Practices, Fifth Edition by Steven M. Bragg Englewood, Colorado

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17–19. Consolidate Payroll Systems

A company that grows by acquisition is likely to have a number of payroll systems—one for each company that it has acquired. This situation may also arise for highly decentralized companies that allow each company location to set up its own payroll system. Though this approach does allow each location to process payroll in accordance with its own rules and payment periods, while also allowing for local maintenance of employee records, there are several serious problems that can be solved by the consolidation of all these systems into a single, centralized payroll system.

One problem with having many payroll systems is that employee payroll records cannot be shifted through a company when an employee is transferred to a new location. Instead, the employee is listed as having been terminated in the payroll system of the location that he or she is leaving and is then listed as a new hire in the payroll system of the new location. By constantly reentering an employee as a new hire, it is impossible to track the dates and amounts of pay raises; the same problem arises for the human resources staff, who cannot track eligibility dates for medical insurance or vesting periods for pension plans. In addition, every time employee data is reentered into a different payroll system, there is a risk of data inaccuracies that may result in such embarrassments ...

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