Payroll System Overview

The Payroll system is an optional module that provides the FACTS user all the tools necessary to generate and maintain payroll for their employees. The system maintains up to 24 periods of employee history.

Payroll data can be segregated by departments and/or branches for reporting and posting. The system provides W-2 information electronically or on preprinted forms. Manual and system checks can be maintained. The system also stores every paycheck for each employee, along with monthly, quarterly and yearly summaries. Interaction with the General Ledger is automatic and great flexibility is available through the use of GL posting tables.

The Payroll menu is composed of the following subsystems or menus:

There are a number of steps that must be taken to set up the Payroll module. The following fields are a sampling of the fields that must be set up: Up to 12 earnings codes may be used to represent regular earnings, overtime earnings, vacation earnings, etc. Earnings codes may be set up for hourly rates, such as regular overtime and double-time or for non-hourly rates, such as bonuses and commissions. Up to 6 Deductions Codes may be used to represent any deductions taken out of earnings, such as Federal, FICA, State, Local, and 2 additional miscellaneous tax codes. There may be up to 10 other deductions after taxes, such as insurance or 401K. The other deductions may work up to a balance, for example loans or advances. Pay Cycles determine how often a payroll is run, for example weekly, biweekly, semimonthly or monthly and the average number of hours worked per payroll.

Once the earnings, deductions, and pay cycles are defined, employees are set up. Employees are set up through the Employee F/M program setting parameters which determine how the system is to process transactions for each employee. Employee information is stored and available to be printed on a report or to be displayed on the screen by an inquiry. Throughout the Payroll system, whenever an employee’s number must be entered, the user has the ability to search for the employee through an alpha lookup. The search capability relieves the user of having to remember employee numbers.

New Employee Checklist

Employee File Maintenance - add the employee to the system.

Employee Pay Cycle File Maintenance - add the employee to the appropriate pay cycle(s). For example, a company may have a weekly pay cycle for hourly employees, a semi-monthly pay cycle for salaried employees, a monthly pay cycle for salespeople and a bonus pay cycle. One employee may be set up in as many pay cycles as needed.

Earnings Distribution File Maintenance - (optional) distributes earnings between the appropriate General Ledger accounts entered from the Salaries G/L#

Employee Deduction Balance File Maintenance - (optional) if the employee has a loan that they are paying off through payroll, enter the amount of the loan balance. Deduction codes may be flagged as to whether they work to a balance, e.g., loan or advance. Balances are set up if an employee has an outstanding balance. The deduction code indicates the amount to deduct from each pay check and as the deduction is used, the deduction balance is reduced. Once the balance reaches zero, the deduction is no longer taken.

Employee Maximum Hours File Maintenance - enter the maximum hours allowed for the rest of the year for the employee earning codes maintained. Example: If the employee starts in the middle of the year and therefore, only has 40 hours (1 week) of vacation time (or sick time) remaining to be earned, enter 40 hours now. Prior to running the first payroll for next year, change the maximum hours to what this employee would normally earn.

When ready to process the first pay cycle, the user runs the Initialize Pay Cycle program. This program sets all the standard earnings and deductions for each employee into a working file. Changes to standard wages can be made through the Earnings Exception Entry and programs.

The Pre-Check Edit List provides a detailed printout of the hours worked, wages earned, and the gross and net amounts of the check for each employee. The user may then enter additional changes and run the Edit List as often as needed until the payroll is correct.

Printed, manual, and voided checks may be used in the Payroll system. Each type of check is updated by the Check Register program. The Check Register provides an audit trail of all checks and updates all appropriate files.

The Employee Inquiry program provides general information, past history by period, check history by check, pay cycle information, deduction balances, maximum hours tracking and period, quarter and year-to-date history for each employee. Employee notes may also be entered in the inquiry program.

All payroll reports have the option of printing in employee number, alpha, branch or employee class order. In addition to the order, the user may choose the range to be printed. For example, the Employee Listing may be printed in alphabetical order. There is a wide variety of reports which print all available information stored in the Payroll system. The following Payroll reports are available:

• The Employee Listing prints a list of employees. Either general or pay cycle information may be printed in either summary or detail form. Active or terminated employees may also be selected.
  
• The Check History Report prints a report of check history within selected dates, in summary, checklist, breakdown or check detail form.
  
• The Employee Maximum Hours Report lists for each employee the maximum hours available, hours used, and hours remaining for any hourly earnings code selected to have maximum hours tracking.
  
• The Earnings % Distribution Report prints a list of the general ledger account numbers for each employee with earnings % distribution and the % of the employees earnings distributed to each account number.
  
• The Employee Period History Report prints a list of each employees hours, earnings and deductions by period in summary or detail for the periods selected.
  
• The Matching Deduction Report prints by deduction code for the period selected, the deduction amount and employer matching deduction amount.
  
• The Worker’s Compensation Report prints for each tax type the rate (%) of contribution paid by the employer along with the earnings contribution, in either summary or detail form.
  
• The Employee Label Print program prints up to 99 labels to print per employee and may be sorted by zip code.
  
• The Employee Notes Print program prints the notes for any employees in the employee notes file.
  
• The PR Code List prints a list of the various PR codes: employee classes, departments, earnings, deductions, tax districts, earnings GL posting tables and deductions GL posting tables. The information stored with these codes is also printed.
  

Payroll is closed out at the end of each period, quarter, and year. Reports on the End-of-Period menu include a Period Earnings/Deductions Report, a Period GL Distribution, a Period Check Register, an Unemployment Report (for any tax district), a 941 Print, and a 945 Print. The End-of-Period Update zeros out the appropriate information for the period being closed so that the next period’s information can be accumulated.

The Payroll system provides a W-2 capture for the end of year processing, so that new payroll year processing can take place even though W-2’s may not be printed yet. The system also provides for magnetic media reporting on floppies or on tape.

Posting to General Ledger

Transactions from Payroll may automatically post to General Ledger. The PR Static Control F/M contains flags, which determine how to post PR transactions to General Ledger.

Through the GL distribution flag the user determines the detail of the journal entries posted. The flag may be set to one of the following: 0-indicating no GL distribution is printed or posted; 1-indicating the GL distribution is printed (printing is in detail format) but not posted to GL; 2-indicating the GL distribution is printed (printing is in detail format) and posted to GL in summary (posting includes the total amount posted to each account number); or 3-indicating the GL distribution is printed (printing is in detail format) and posted to GL in detail (posting includes each item contributing to the amount for each account number).

Through the posting journal the user determines which GL journal (where in the general ledger journal file) to post transactions.

There are standard entries made to general ledger when posting payroll. For example when an employee is written a payroll check, one debits salaries and credits cash. The user must set up where these standard GL account numbers used are and where they will come from.

The Payroll transactions are posted to General Ledger by the Payroll Check Register update. The standard account numbers posted are determined by the earnings and deductions GL posting tables. Users establish their own set of valid earnings and deductions GL posting tables. Each employee by pay cycle is assigned to an earnings and deductions GL posting table which determines the correct GL account numbers to post to when posting earnings and deductions to general ledger for that employee/pay cycle.

Earnings Gl Posting Tables

Payroll earnings can post to the GL according to the type of payroll employee. Separate posting tables would be set up for each type of employee.

Example 1 - Multiple Earning GL Posting Tables

ADM - Administrative Salaries   SLS - Sales Salaries  

Reg  570-01-00 Adm Salaries-Reg  Reg  580-01-00 Sls Salaries-Regr

Sick  571-01-00 Adm Salaries-Sck  Sick  581-01-00 Sls Salaries-Sick

Vac  572-01-00 Adm Salaries-Vac  Vac  582-01-00 Sls Salaries-Vac

Ovt  573-01-00 Adm Salaries-Ovt  Ovt  583-01-00 Sls Salaries-Ovt

Hol1  574-01-00 Adm Salaries-Reg  Hol1  584-01-00 Sls Salaries-Reg

Hol2  575-01-00 Adm Salaries-Reg  Hol2  585-01-00 Sls Salaries-Reg

Com  576-01-00 Adm Salaries-Comm  Com  586-01-00 Sls Salaries-Comm

The administrative employee earns:   The sales employee earns:

Regular $1000.00    Regular  $ 500.00

Sick  $ 500.00    Sick  $ 100.00

Overtime $ 250.00    Commission $1500.00

The system uses the GL table to distribute the earnings as follows:

Example 2 - Earning and Deduction GL Tables

Employee earnings consists of:  Employee deductions consists of:   

Regular  $2000.00  Federal   $100

Sick  $ 500.00  FICA   $ 50

Overtime $ 250.00  State   $ 25

     Insurance  $ 10

     401K   $ 30

     Net Check  $2535    

The GL distribution posts as follows:

* = G/L # assigned to bank printing checks.

** = G/L # assigned to employee GL deductions posting table, =.

Deductions Gl Posting Tables

Example 3 - Deduction GL Posting Tables

In our example, all employees, regardless of department, are assigned to the same deductions GL posting table.

STD - Standard Table     Matching Expense GL#  

FICA  333-00-00 Fica Taxes Employee  Fica  340-00-00 Fica Taxes Employer

Fedl  331-00-00 Federal Taxes   401K  341-00-00 401K Employer

Stat  332-00-00 State Taxes

Locl  333-00-00 Local Taxes

Ins  335-00-00 Insurance

Dntl  336-00-00 Dental

401K 337-00-00 401K Employee

Advc 338-00-00 Advance

Employee earnings consists of:  Employee deductions consists of:

Regular  $2000.00  Federal   $100

Sick  $ 500.00  FICA   $ 50

Overtime $ 250.00  State   $ 25

     Insurance  $ 10

     401K   $ 30

     Net Check  $2535

The GL distribution posts as follows:

* = G/L # assigned to bank printing checks.

** = G/L # assigned to employee GL deductions posting table, =.

Earnings Distribution

Through the PR Static Control F/M, the user sets the Use Earnings Distribution flag to indicate if the earnings % distribution feature is used. If set to Y, the earnings percent distribution file is active and the Earnings % Distribution F/M program is available. If the system uses earnings distribution by %, and employees have earnings % distribution records, then it takes precedence over their earnings GL posting table during posting.

Example 4 - Earnings Distribution

An employee is assigned to the following earnings GL posting table:

ADM - Administrative Salaries   

Reg  570-01-00 Adm Salaries-Regular  

Sick  571-01-00 Adm Salaries-Sick  

Vac  572-01-00 Adm Salaries-Vacation 

Ovt  573-01-00 Adm Salaries-Overtime 

Hol1  574-01-00 Adm Salaries-Regular  

Hol2  575-01-00 Adm Salaries-Regular  

Com  576-01-00 Adm Salaries-Commisions 

The employee earns the following:

Regular   $1000.00 

    $1000.00

If the Use Earnings Distribution flag is set to N, the system uses the GL table to distribute the earnings as follows:

      Debit

570-00-00 Salaries-Regular  1000.00

If the Use Earnings Distribution flag is set to Y, the system uses the earnings % distribution from the Earnings % Distribution F/M program.

The employee earns 50% from Branch 1 and 50% from Branch 2.

The system distributes the earnings as follows:

      Debit

575-00-01 Salaries-Reg Br 1   500.00

575-00-02 Salaries-Reg Br 2   500.00

Post Unemployment

Through the PR Static Control F/M the user sets the post unemployment flag to indicate if the unemployment insurance (or tax) is to post to general ledger. If Y is entered, the system posts the unemployment debit and credit amounts to general ledger based on the tax districts. The Check Register GL distribution prints the unemployment GL information before posting occurs.

NOTE: If you are posting unemployment to GL, the system does not automatically post taxes payable to the accounts payable system. Therefore, the unemployment debit may be set up as the AP expense account (example, payroll tax expense) and the unemployment credit may be set up as the liability which becomes a zero-balance account when the taxes are entered in AP.

Example 5 - Posting Taxes Payable

Post Worker’s Compensation

Through the PR Static Control F/M the user sets the Post Worker’s Comp flag to indicate whether to post worker’s compensation to general ledger. If Y is entered, the system posts the worker’s compensation accrual and expense amounts to general ledger based on the employees’ worker’s compensation code (Worker’s Comp F/M). The Check Register GL distribution prints the worker’s compensation GL information before posting occurs.

NOTE: Each employee may be assigned to a branch through the Employee F/M however, the branch may not automatically post to General Ledger. Earnings and deductions GL posting tables must be set up with branch already inserted (if applicable) to post to General Ledger.

If Posting To Job Cost From Payroll

During the Earnings Exception Entry program the user may post the earnings to a job number to post to Job Cost. If job cost information is entered the debit (expense) account number comes from one of two places. If the Post Work-in-Process flag is set to Y in the JC to GL Posting F/M program, the debit account number is a work-in-process account number. Depending on the Basis flag set in this record for work-in-process, the default number is used or the work-in-process account number is assigned to the cost type for the GL posting table assigned to the job. If the post Work-in-Process flag is set to N in the JC to GL Posting F/M program, the expense account number is the standard earnings G/L # posted (same as if Job Cost is not used).

The Check Register GL distribution posts to GL as follows:

The work-in-process or expense GL number also posts into the Job Cost Job Posting Entry file. The Job Posting Register is then run which updates the WIP or expense GL number to the Job Cost transaction file. This transaction file is used for billing purposes.

Once billing takes place, the JC Invoice Register is printed along with the Invoice Register GL distribution.

The GL distribution posts as follows:

The WIP or expense GL number was originally debited in Payroll and in Job Cost is credited. This means the WIP or Expense number is a wash account with the amount posting to the Cost of Sales GL account number.