Professional December 2017/January 2018

Manual payroll calculations have value

Gretchen Inouye CPP, payroll consultant, explains why

T he ability to accurately calculate payroll transactions has value even in this technological age. It’s about more than just being able to do the math. Payroll is far more complex than just numbers. Three of the key areas in understanding the components and being able to perform essential calculations are compliance, system integrity, and customer service. Compliance Correct methods of calculating overtime, regular rate of pay, tax computations, involuntary deductions, taxable values of noncash fringe benefits, and other payroll- related items are generally prescribed by regulations. These regulations are established by the U.S. Department of Labor, the Internal Revenue Service, the Office of Child Support Enforcement, and additional regulatory bodies. Failure to meet the requirements of the applicable regulations can lead to noncompliance and costly penalties. Contractual arrangements also may have terms in specific areas of compliance that require calculations. In each of these regulatory and contractual situations, a sound understanding of the terminology and concepts is necessary for successful completion of any calculations required. Those concepts are integrated into payroll course materials and instruction. System integrity We hear questions from students in the American Payroll Association’s (APA’s) learning centers asking why is it necessary to learn the calculations when computers do the work much faster? Technology is certainly quicker and easier, but unless the programs have been coded correctly and the calculations are tested, they could be quicker and completely wrong. While most programmers are usually fluent

when it comes to formulas, they do not have backgrounds in payroll and may not understand the terminology. Payroll professionals’ understanding of how the calculations need to work and the ability to communicate those concepts can assist programmers in developing useful and accurate systems. Once a system has been set up, it should be tested periodically and especially when any changes have been made such as updates based on regulatory changes. Manual calculations of sample payroll transactions should be part of testing and validation. Spreadsheets can be great tools for performing mathematical tasks quickly, but someone with knowledge and ability is still needed to create a properly formatted template. ...understanding of the terminology

knows its business. The ability to answer questions about payroll processes or to provide a quick analysis to higher-level executives can help build payroll’s credibility within the organization. Being able to do payroll calculations on the spot may be necessary, can be impressive, and adds value. That positive image can help give payroll a voice when decisions are being contemplated that will have an effect on payroll operations. Happy calculating. ❏ This article was published in the February 2017 issue of the American Payroll Association’s PayTech magazine. The APA,, is the USA’s leader in payroll education, publications, and training. This nonprofit association conducts more than 300 payroll training conferences and seminars across the country each year and publishes a complete library of resource texts and newsletters. Representing more than 21,000 members, APA is the industry’s highly respected and collective voice in Washington, D.C. The Global Payroll Management Institute (GPMI), www.GPMInstitute. com, spearheads the APA’s global initiatives to provide the world with a leading community of payroll leaders, managers, practitioners, researchers, and technology experts. Subscribers connect with each other through networking discussions, collaborative opportunities, and access to education and publications dedicated to global payroll strategies, knowledge, research, employment, and training. GPMI also publishes several global payroll texts and white papers as a benefit to subscribers. Gretchen Inouye CPP, is the APA’s 2015 Payroll Woman of the Year.

and concepts is necessary for successful completion...

Customer service If an employee comes to payroll believing a paycheck amount is wrong, a response that “it must be right because that’s how the system calculated it” is not likely to be satisfactory. A principle of good customer service from payroll is to provide assurance that the department is competent and has expertise in its field. Walking an employee through the paycheck calculations demonstrates that level of expertise, which helps build trust. Spending time with one employee also may save time when the employee lets everyone else know that payroll really


Issue 36 | December 2017/January 2018

| Professional in Payroll, Pensions and Reward |

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