Accounting Information Systems: The Processes and Controls, 2nd Edition

PAYROLL PROCESSES (STUDY OBJECTIVE 2)

The payroll process is initiated when employees are hired by the company. Different companies may have very diverse hiring processes. For example, some companies may have an employment office or placement department to handle their recruiting and hiring, while in others (especially smaller companies) personnel in the various departments that have job vacancies may conduct these activities. Regardless of the manner in which it is handled, the hiring of employees is typically considered a nonroutine process. Accordingly, members of management are required to specifically approve all employees hired by the company, even if they are initially screened by an employment office. A hiring decision usually happens as a result of an interview or interviews and is documented on a signed letter and/or signed employment contract.

Since companies need human resources in order to conduct business operations, the hiring process must occur before other business transactions can take place. Although this may be true initially, the payroll process is also an ongoing organizational process. A company may need to hire new employees at various times throughout its life cycle in order to accommodate growth and replace employees who have left the company, have retired, or have been relocated, reassigned, or terminated.

Information for all employees must be retained and updated regularly. The human resources department is responsible for maintaining records for each ...