Page 109 - Essentials of Payroll: Management and Accounting

ESSENTIALS of Payr oll: Management and Accounting
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Prohibit Deductions for Employee Purchases

Many companies allow their employees to use corporate discounts to buy
products through them.For example,a company may have obtained a large
discount on furniture from a supplier, then allows its employees to buy at
the discounted rate and have the deductions subtracted from their pay-
checks in convenient installments. Some employees will make excessive use
of this benefit, purchasing all kinds of supplies through the company;

accordingly,it is common to see a small minority of employees making the
bulk of these purchases.The problem for the payroll staff is that they must
keep track of the total amount that each employee owes the organization
and gradually deduct the amount owed from successive paychecks. If an
employee makes multiple purchases,the payroll staff must constantly recal-
culate the amount to be deducted.Depending on the number of employ-
ees taking advantage of discount shopping through the company, this can
have a measurable impact on the efficiency of the payroll department.
The solution to this problem is to prohibit employee purchases

through the organization. By doing so, all the extra paperwork associated
with employee purchases is immediately swept away. That said, though
this is a good best practice for most companies to implement,it should first
be cleared with senior management. The reason is that some employees
may be so accustomed to purchasing through the company that they
will be upset, even angry, by the change, which may be a condition that
management wants to avoid (especially if valuable employees will be

among those upset). Also, some companies have valid reasons for allow-
ing employee purchases, such as when, for example, steel-toed boots or
safety clothing are necessary for performing their jobs.

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