4.

Human Resources or Payroll Cycle

4.1 Definition
The human resource/payroll cycle is a recurring set of business activities and related
data processing operations associated with effectively managing the employee work
force. The three basic functions the AIS provides in the HRM/payroll cycle are:
1. Processing transactional data about employee activities
2. Safeguarding the organizations assets
3. Providing information for decision-making

4.2 Scope/Subsystem
4.2.1 Update master payroll file
The first activity in the Human resource/payroll cycle involves updating the
payroll master file to reflect payroll changes such as new hires, terminations,
changes in pay rates, or changes in discretionary withholdings. It is important
that all payroll changes are entered in a timely manner and are properly
reflected in the next pay period.
4.2.2

Update tax rate and deductions

The second activity in the Human resource/payroll cycle involves updating
information about tax rates and other withholdings. These changes happen
whenever updates about changes in tax rates and other payroll deductions are
received from various government units and insurance companies.

4.2.3

Validate time and attendance data

The third activity in the payroll cycle is to validate each employees time and
attendance data. This information comes in various forms, depending on an
employees status. In this activity, there are some pay schemes:
1. time cards for those paid on an hourly basis
2. self report for professionals
3. straight commission or salary plus commission
4. incentives and bonuses
The procedures for use this activy are:
-

The payroll department is responsible for validating employee time

records.
For factory workers, validation involves comparing the total time

worked with the time spent on each job.

The payroll clerk calculates batch totals and enters them along with the

time data.
The batch totals are recalculated by the computer after subsequent
processing steps.

4.2.4

Payroll transaction data are entered through online terminals.

Edit checks are performed on each time and attendance record.

Prepare payroll activity

The fourth activity in the payroll cycle involves preparing payroll. Data about
the hours worked are provided by the department in which the employee
works. Pay rate information is obtained from the payroll master file. The
person responsible for preparing paychecks cannot add new records to this file.
The procedures in this activity are:
1. Payroll processing is performed in the computer operations department.
2. The payroll transaction file is sorted by employee number.
3. The sorted time data file is used to prepare employee paychecks.
4. All payroll deductions are summed and the total is subtracted from
gross pay to obtain net pay.
5. Payroll deductions: withholdings, voluntary deductions
6. Finally, the payroll register and employee paychecks are printed.

4.2.5

Disburse payroll
The fifth activity is actual disbursement of paychecks to employees. Most
employees are paid either by check or by direct deposit of the net pay amount
into the employees bank account. The procedures in this activity are:
1. Once paychecks have been prepared, the payroll register is sent to the
accounts payable department for review and approval.
2. A disbursement voucher is then prepared.
3. The disbursement voucher and payroll register are then sent to the
cashier.

4.2.6

Calculate Employer-Paid Benefits and Taxes

Some payroll taxes and employee benefits are paid directly by the employer.
Federal and state laws require employers to contribute a specified percentage
of each employees gross pay to federal and state unemployment compensation
insurance funds. Employers often contribute to health, disability, and insurance
premiums. Many companies also offer their employees flexible benefit plans.
Many employees are offered and contribute toward a choice of retirement
savings plans.

4.2.7

Disburse Payroll Taxes and Other Deductions

The final activity in the payroll process involves paying the payroll tax
liability and the other voluntary deductions of each employee. An organization
must periodically prepare checks or use electronic transfer to pay the various
tax liabilities incurred. The timing of these payments is specified by the

respective government agencies. The funds voluntarily withheld from each

employees paycheck for various benefits must be disbursed to the appropriate
organizations.

4.3 Purpose and benefit

A major purpose of the AIS in the HRM/payroll cycle is to provide adequate internal
controls to ensure meeting the following objectives:
All payroll transactions are properly authorized.
All recorded payroll transactions are valid.
All valid, authorized payroll transactions are recorded.
All payroll transactions are accurately recorded.
Applicable government regulations regarding remittance of taxes and filing of
payroll and HRM reports are met.
Assets (both cash and data) are safeguarded from loss or theft.
HRM/payroll cycle activities are performed efficiently and effectively.

4.4 Unit related

4.4.1

4.4.2

Internal
Human resources department
Accounting department
Employees
External
Government
Bank
Insurance Company

4.5 Documents
4.5.1

ATTENDANCE LIST

Original
of

the

document
: Human
resource
department
Copies of the document : Each department
Attendance list=
AttendanceListNumb+EmployeeID+EmployeeName+DateofAttend+DayofA
ttend+TotalWeekofAttend
4.5.2

TIMESHEETS

Original

of

document
Employee
Copies of
document : Human resources department

the
:
the

Timesheet=
TimesheetNumb+Date+EmployeeID+EmployeeName+Supervisor+Departm
ent
+StartTime+ EndTime+lessLunch+TotalHrs+weeklyTotal
4.5.3

PAYROLL REGISTER

Original

of

the

document
Employee
Copies
of

:
the

document : Human resources department

Payroll register=
PayrollRegisterNumber+EmployeeID+EmployeeName+TotalWorkingHrs+
Grosspay+StateTax+ProfessionalTax+FederalIncomeTax+ProvideFund+Wag
esPaid

4.6 Procedure
4.6.1

Narrative
Employee follows established procedures for completing timesheet and
obtaining supervisors approval. Once timesheet(s) is complete (time
recorded, employee signature, supervisor approval, the timesheet(s) is routed
by TRS to the BRC Payroll team. Timesheets should be submitted to the
BRC Payroll team in accordance with TRS Time Reporting Schedule. The
BRC preparer checks that leave balances are sufficient to cover the time
reported and/or hours reported match the employees appointment.
Additionally, the BRC preparer notes leave without pay as it requires a
manual transaction in EDB. If there are any exceptions noted during the
review, BRC analyst works with the Leave Manager, the employee and/or the
employees supervisor to resolve the issue. In some instances, this may
require that the timesheet is returned, using TRS, for action and

resubmission. This may also require revision of the Leave of Absence form.
The BRC assistant prints the employee payroll roster to confirm that all
employees have submitted their electronic timesheet in TRS. The payroll
roster serves as a control document to ensure that a timesheet has been
received for each employee. If any are missing, the BRC assistant or analyst
contacts the employee and the supervisor to obtain the TRS timesheet. When
each departments roster is reviewed and determined to be complete, the
BRC preparer submits attendance files in TRS. Manual transactions are
entered at this time if any errors are flagged when the time is submitted in the
TRS data to PPS. Reviewing the biweekly roster. On the day following the
submission to TRS, the BRC analyst confirms in PTR that each employee on
the departments roster has confirmed positive payment (i.e., there is a Y in
the PTR Roster field). If there are any exceptions (i.e., blanks in the field),
the BRC analyst must make the appropriate manual transaction in EDB. At
the closure of monthly and biweekly cycles, a pay audit report is downloaded
from the Data Warehouse. This is the final check to assure all employees are
getting paid accurately. For monthly exempt employees who report exception
item, any time reported as Leave Without Pay (LWOP) will require BRC
staff to enter a transaction to bill the employee or deduct the hours on the
next pay cycle. A deduction transaction will require the BRC staff seek
employee authorization. A comparison from the TRS to pay audit report is
conducted. If no adjustments

are needed, the reports are filed

electronically. If adjustments are needed, the preparer makes necessary

adjustments and requests a rush check for underpayments, overpayments, or
a full check which may have been blocked from the roster.
4.6.2 Diagram (CD/DFD)
The diagramming procedures are Attached (Attachment-7)

4.7 System File

4.7.1

Normalization

UNF

AttendanceListNumb+TimesheetNumb+PayrollRegisterNumber
+EmployeeID+EmployeeName+Supervisor+Department+
{DateDayofAttend+StartTime+EndTime+lessLunch+TotalHrs+
TotalWeekofAttend+Grosspay+StateTax+ProfessionalTax+Federal
IncomeTax+ProvideFund+WagesPaid}

NF-1
Attendece_file
Payroll_file

AttendanceListNumb+TimesheetNumb+PayrollRegisterNumber
+EmployeeID+EmployeeName+Supervisor+Department
AttendanceListNumb+DateDayofAttend+StartTime+EndTime+les
sLunch+TotalHrs+TotalWeekofAttend+Grosspay+StateTax+Profe
ssionalTax+FederalIncomeTax+ProvideFund+WagesPaid

NF-2
Attendece_file
Employee_file
TimeSheet_file
Payment_file

AttendanceListNumb+TimesheetNumb+PayrollRegisterNumb+E
mployeeID+DateDayofAttend+WagesPaid
EmployeeID+EmployeeName+Supervisor+Department
DateDayofAttend+StartTime+EndTine+LessLunch+TotalHrs+Tolt
alWeekofAttend
WagesPaid+Grosspay+StateTx+ProfessionalTax+FederalIncomeT
ax+ProvideFund

4.7.2 Microsoft Access

Attachment-8

4.8 Risk/Internal Control

PROCESS OR

THREAT

INTERNAL CONTROL

ACTIVITY
Employment

1. Hiring unqualified or

Sound hiring procedures,

practices

larcenous employees
2. Violation of employment

including verification of job

law

applicants skills, references, and

employment history
Through documentation of hiring
and discharge procedures;
training on current development

Payroll
Processing

3. Unathorized changes to
payroll master file

in employee law
Segregation of duties; HRM,
payroll calculation, and

4. Inaccurate time data

5. Inaccurate processing of
payroll
6. Theft or fraudulent

paychecks distribution; access

control; audit and review of all
changes to payroll master file

distribution of paychecks Automation of data collection;

various edit checks;
reconciliation of time card data
with job-time ticket data
Batch totals and other application
controls; payroll clearing
account; review of IRS
General control
issues

7. Loss, alteration, or
unauthorized disclosure
of data
8. Poor performance

regulations
Backup procedures; disaster
recovery plans; physical and
logical access control; encryption
of data and data transmission
controls
Development and periodic
review of appropriate
performance metrics; training
programs

4.9 Report
4.9.1 Payroll Register
The payroll register is a report that lists each employees gross pay, payroll
deductions and net pay.
4.9.2 Deduction Register
Sometimes the payroll register is accompanied by a deduction register which
lists the miscellaneous voluntary deductions for each employee.
4.9.3 Earnings Statement
Employee paychecks also typically include an earnings statement, which lists
the amount of gross pay, deductions and net pay for the current period and
year-to-date totals.
4.9.4 Additional Reports
Additional reports are produced by the payroll system; especially for
Government agencies.