Article

Payroll Processing

Financial Management and Accounting

Payroll Processing

 

Instead of hiring staff to perform this function, the organization may choose to outsource (contract) the management of payroll and benefits through one of a number of commercial companies that specialize in this service. These companies are called Professional Employer Organizations (PEO). In some instances, the PEO may hire the individuals and lease them back to the nonprofit organizations. ADP TotalSource and Administaff are examples of PEO’s, and there are many others throughout the country.

 

Employment Documents

 

If the organization elects to maintain its own payroll, the process will begin at hiring. The Human Resources Department or Manager will be responsible for verifying all required credentials, including the Social Security card, and for completing the I-9 form to verify eligibility to work in this country. The employee’s supervisor must ensure that the employee completes a W-4 Employee Withholding Allowance Form to indicate taxes to be withheld. The W-4 will be forwarded to Payroll along with other forms that verify employee consent to withholding for benefits.

 

If automated time clocks are not available, hourly employees must sign a physical time log to verify work time. Those time logs must be forwarded to payroll at the scheduled time for each pay period. [Examples of individual and departmental time logs are attached.]

 

The employee must provide bank information and sign an authorization to have his or her salary deposited directly to a bank account. [A sample authorization document is attached.]

 

Complying with Federal Wage Laws

 

Payroll must comply with all of the provisions of the Fair Labor Standards Act (FLSA) which specifies the law regarding exempt and nonexempt status, and overtime pay. The brief description contained here in no way defines the provisions of the Act. Human Resources, Payroll, and all supervisors should be trained in the provisions of FLSA.

 

Exempt versus non-exempt status. Positions should be evaluated carefully by the Human Resources Department to determine whether they qualify for exempt status – that is, not subject to overtime. In general, these jobs are management or professional roles, but the job should be compared to the specific provisions of the law.

 

Overtime pay. Employees who do not qualify for exempt status must be paid at overtime rates when they work over 40 hours per week. The organization may establish a shorter work week and pay overtime after that threshold has been reached. But, overtime must be paid after 40 hours. Overtime is one and one-half times the hourly rate. All work-related activity, whether performed on the premises or elsewhere, must be counted toward the total. Work performed at home counts. Two common mistakes are made in attempting to control overtime: (1) It is not permissible to give an employee “compensatory time” -- time off equivalent to the tIme worked -- in lieu of overtime pay. (2) Hours cannot be averaged across pay periods to avoid the payment of overtime.

 

Timely pay. Employees must be paid at the next scheduled pay period. Failure to do so is considered a failure to pay and violates the law.

 

For more information about FLSA and other employment laws, see

www.dol.gov/elaws.

 

 

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DISCLAIMER

This work is supported under a five-year cooperative agreement # H235V060016 awarded by the U.S. Department of Education, Office of Special Education and Rehabilitative Services, and is administered by the Pass It On Center of the Georgia Department of Labor – Tools for Life.  However, the contents of this publication do not necessarily represent the policy or opinions of the Department of Education, or the Georgia Department of Labor, and you should not assume endorsements of this document by the Federal government or the Georgia Department of Labor.

Attachments

Other Information

Title: Payroll Processing
Module: Finance/Accounting
Author: Trish Redmon
Audience: Administrator
Sub Title: Documents, overtime laws
Procedure:
Organization Source: Pass It On Center
Last Reviewed: 08-21-2009 4:20 PM