Accounting Best Practices, Fifth Edition

17–21. Link Payroll Changes to Employee Events

There are many payroll changes that must be made when certain events occur in an employee file. Many of these changes are never made, because either the payroll staff is so busy with the standard, daily processing of information that it has no time to address them or the payroll staff does not possess enough knowledge to link the payroll changes to the employee events. For example, when an employee is married, this should trigger a change in that person’s W-4 form, so the amount of taxes withheld will reflect those for a married person. Automation can create many of these linkages. Here are some examples:

• As soon as an employee reaches the age of 55, the system issues a notification to the pension manager to calculate the person’s potential pension, while also notifying the employee of his or her pension eligibility. These notifications can be by letter, but a linkage between the payroll system and the e-mail system would result in more immediate notification.

• As soon as an employee has been with a company for 90 days, his or her period of probation has been completed. The system should then automatically include the employee in the company’s dental, medical, and disability plans, and include deductions for these amounts in the person’s paycheck. Similarly, the system can automatically enroll the employee in the company’s 401(k) plan and enter the deductions in the payroll system. Since these pay changes should not be a surprise to ...