Business user guide

[Henry Hartley]

-----Original Message-----
From: herman [mailto:herman at aerospacesoftware.com] 
Sent: Tuesday, May 20, 2003 11:39 AM
 
 The traditional reason for having a 'Payroll Module' is to get user lock
in.  Commercial accounting software companies require that the users buy
periodic updates of the tax tables and since the government can never leave
the tables alone, that produces a good stream of revenue.  Of course, they
typically also require the users to buy updates even when nothing at all
changed, but that is another story. Since the CCRA provides the dinky little
Windows Tables on Disk program, much of the need for small businesses to use
a payroll service is eliminated, but that is not true for other countries.

Somehow one needs to:
a. Compute the deductions based on rules/tables provided by the tax agency
for each employee
b. Print pay slips
c. Print pay cheques
d. Record the salaries & wages and payroll taxes for all employees
e. Record employee leave
f. Print a single payroll tax cheque to settle the account with the tax
agency
g. Print a consolidated Payroll report as an audit trail
h. Print a Record of Employment when an employee gets laid off, for
Employment Insurance / Social Security / Maternity Leave / Medical Leave
purposes
i. Compute Holiday Pay, Termination Pay, Pay in Lieu of Notice and other
lay-off related pay - nice to have stuff - not essential

Let me start by saying I'm pretty much new to GNUCash so I really have no
idea of what it can and cannot do.  I've used everything from Quick Books
for a small business with no payroll to CostPoint for a nearly $300 million
a year company.
 
Some of those sound simpler than they actually might be.  For instance, f.
Print a single payroll tax cheque to settle the account with the tax agency
is really f. Print consolidated payroll tax cheques to each tax agency.
There are (at least in the USA) multiple things that have to be computed
based on pay, not all of which are payroll deductions.  Although most small
businesses won't have all of these, anyone with a payroll will have most of
them:
 
FICA (Social Security) and Medicare (deduction)
Payroll tax (That same amount again but as an expense to the employer)
401K contricutions (deduction - pre-tax and/or expense)
Cafeteria plan contributions (deduction - pre-tax)
Federal Income Tax withholding (deduction)
State Income Tax withholding (deduction)
Local Taxes (some jurisdictions)(deduction)
Workers' Compensation (expense)
Federal Unemployment Tax (expense)
State Unemployment Tax (expense)
Reimbursements for additional health care, etc. costs (deduction)
Garnishments
 
I'm sure I'm forgetting some.  Then, payments have to be made (some monthly,
some quarterly) to pay the Feds the FICA/Payroll Tax/Income Tax Withholding
amounts, the state (or states in some cases) for their withholding, the Feds
for Unemployment, the State (and even more likely states) for Unemployment
and again for Workers' Comp.  Any amounts for 401K, Cafeteria plans, health
care, etc. have to be paid, also.
 
At the end of the year (or the beginning of the next) you will need to
generate the numbers for the annual reporting burden.  You'll also want to
print W-2s and W-3s, etc.
 
Additionally, leave accrual is sometimes based on hours worked.  You have to
deal with paying time and a half for overtime, etc.
 
Payroll isn't simple but it isn't rocket science, either.  It's just that
there is a long list of possible calculations that need to be made.  The
order of the deductions is important for some (i.e. 401K deductions come out
before tax withholdings).  Naturally every state in the US has a different
set of tables.  They are a matter of public record so keeping them up to
date isn't really as hard or costly as it sounds.  It's true, however, that
accounting software companies make their systems complicated enough that
users are encouraged to use their update service.  These services often
leave a great deal to be desired.
 
Okay, a large company with thousands (or probably even dozens) of employees
isn't going to be using GNU Cash as their accounting system.  Still, many of
these things need to be handled even if you only have one employee.  I'd say
that the bare minimum would be FICA/Medicare/Payroll Tax, Federal and State
Income Tax withholdings, and Workers' Comp/Fed and State Unemployment
calculations.  Being able to have employees in more than one state would
certainly be useful in many areas (many companies in our area have employees
in Maryland, Virginia, DC, and/or West Virginia).
 
-- 
Henry Hartley

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