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1–1
CHAPTER 1
Note: Working space and special forms are provided for the Practical Problems and the
Continuing Payroll Problem only. If students are required to prepare written answers to
the Questions for Review, Questions for Discussion, and Case Problems, blank paper
should be provided.
Learning Objectives
After studying this chapter, students should be able to:
1. Identify the various laws that affect employers in their payroll operations.
2. Examine the recordkeeping requirements of these laws.
3. Describe the employment procedures generally followed in a Human Resources
Department.
4. Recognize the various personnel records used by businesses and know the type of
information shown on each form.
5. Identify the payroll register and the employee’s earnings record.
Contents
Chapter 1 outline:
LEARNING OBJECTIVES
THE PAYROLL PROFESSION
FAIR LABOR STANDARDS ACT
RECORDKEEPING REQUIREMENTS
FAIR EMPLOYMENT LAWS
Civil Rights Act of 1964
Executive Orders
Age Discrimination in Employment Act
Americans with Disabilities Act
OTHER FEDERAL LAWS AFFECTING THE NEED FOR PAYROLL AND PERSONNEL
RECORDS
Federal Personal Responsibility and Work Opportunity Reconciliation Act of 1996
Immigration Reform and Control Act of 1986
E-Verify
Family and Medical Leave Act of 1993
1–2 Payroll Accounting
Uniformed Services Employment and Reemployment Rights Act of 1994
Employee Retirement Income Security Act of 1974
Disclosure Requirements
Affordable Care Act of 2010 (ACA)
Applicable Large Employers (ALEs)
Small Employers
OTHER STATE LAWS AFFECTING THE NEED FOR PAYROLL AND PERSONNEL
RECORDS
Workers’ Compensation Laws
State Disability Benefit Laws
HUMAN RESOURCES AND PAYROLL ACCOUNTING SYSTEMS
HUMAN RESOURCES SYSTEM
Job Descriptions
Requisition for Personnel
Application for Employment
Reference Inquiry
Hiring Notice
Employee History Record
Change in Payroll Rate
Matching Quiz (p. 1–27)
Chapter 1 1–3
Questions for Review (p. 1–27)
2. To meet the requirements of the FLSA, the employer must keep records providing
the following information with respect to each employee’s wages earned:
a. Day and time of day when workweek begins
b. Regular hourly rate of pay
3. FICA levies taxes on employers and employees to finance the Federal Old-Age and
4. The taxes paid to the federal government (FUTA tax) are used to pay the state and
5. The unfair employment practices prohibited by the Civil Rights Act of 1964, as
amended, include:
6. The purpose of the Age Discrimination in Employment Act (ADEA) is to prohibit
1–4 Payroll Accounting
7. A key exception is executives who are 65 or older and who have held high policy-
8. The Walsh-Healey Public Contracts Act covers laborers for contractors who furnish
10. ERISA was designed primarily to ensure that workers covered by private pension
11. Vesting conveys to employees the right to share in a retirement fund in the event they
are terminated before the normal retirement age. The vesting process is linked to the
12. The administrator must furnish a statement, not more than once in a 12-month
13. The insurance provided must meet these two tests:
14. The procedure that may be followed by the Human Resources Department in hiring
new employees is:
Chapter 1 1–5
15. The application for employment form may provide information such as the following:
16. The employer who is subject to the Civil Rights Act of 1964 and the Age Discrimina-
17. The Fair Credit Reporting Act of 1968 subjects employers to certain disclosure oblig-
ations when they seek an investigative report from a consumer reporting agency on a
job applicant or, in certain instances, on present employees. Generally, these steps
must be followed:
18. A typical payroll accounting system includes the following procedures:
Questions for Discussion (p. 1–28)
1. A small retailer with only three employees would not need very detailed personnel
1–6 Payroll Accounting
2. Many employers do not check job applicants’ references because former employers,
who are afraid of lawsuits, tend to be less than candid in their comments about ex-
3. Use of this approach in staffing an office may pose too great an opportunity for the
development of cliques in the office. The applicant recommended may not be desira-
4. Sources of potential employees include employment agencies, both public and private;
newspaper advertisements (Help Wanted and Jobs Wanted); employment bureaus in
5. a. and b. Illegally. Answers to these two questions could reveal the national origin,
race, religion, or color of the applicant. One exception to this is when infor-
Chapter 1 1–7
Case Problem (p. 1–28)
Case 1–1
Even though it was the company’s mistake, legally it was entitled to reimbursement from
