Page 118 - Essentials of Payroll: Management and Accounting

Payr oll Best Practices
suppliers, such as the 401(k) plan administrator and health
insurance provider, of the change.
• When a new employee is hired, the system sends a message
to the purchasing department, asking that business cards be
ordered for the person. Another message goes to the informa-
tion systems department, requesting that the appropriate levels
of system security be set up for the new hire. Yet another
message goes to the training department, asking that a training
plan be set up for the new employee.
Many of these workflow features are available on high-end

accounting and human resources software packages. However, this soft-
ware costs more than a million dollars in most cases, and so is well
beyond the purchasing capability of many smaller companies. An alter-
native is to customize an existing software package to include these fea-
tures, but the work required will be expensive. Accordingly, these
changes should only be contemplated if there are many employees,
since this would result in a sufficient volume of savings to justify the

added expense.
Cost:

Installation time:

Link the 401(k) Plan to the Payroll System
A common activity for the payroll staff is to take the 401(k) deduction

information from the payroll records as soon as each payroll cycle is com-
pleted, enter it into a separate database for 401(k) deductions, copy this
information onto a diskette, and send it to the company’s 401(k) admin-
istration supplier, who uses it to determine the investment levels of all
employees, as well as to test for 401(k)discrimination. This can be a
lengthy data entry process if there are many employees, and it is certainly

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