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CHAPTER 13 THE HUMAN RESOURCES MANAGEMENT/ PAYROLL CYCLE INTRODUCTION Questions to be addressed in this chapter include: What are the basic business activities and data processing operations that are performed in the human resources management (HRM)/payroll cycle? What decisions need to be made in this cycle, and what information is needed to make these decisions? What are the major threats and the controls that can mitigate those threats? The HRM/payroll cycle is a recurring set of business activities and related data processing operations associated with effectively managing the employee workforce. The most important tasks performed in the HRM/payroll cycle are recruiting and hiring new employees; training; job assignment; compensation (payroll); performance evaluation; and discharge of employees (voluntarily or involuntarily). Additionally, payroll costs are allocated to products and departments for use in product pricing and mix decisions. The payroll system handles compensation, while the other duties are the purview of HR management. This chapter focuses primarily on the payroll system, which is one of the largest and most important components of the AIS. This system must be designed to meet management’s needs and government regulations. Incomplete or erroneous payroll records can impair decision making and result in fines or imprisonment. There are five major sources of input to the payroll system. The HRM department provides information about hirings, terminations, and pay-rate changes. Employees provide changes in discretionary deductions (e.g., optional life insurance). Various departments provide data about the actual hours worked by employees. Government agencies provide tax rates and regulatory instructions. Insurance companies and other organizations provide instructions for calculating and remitting various withholdings. Principal outputs of the payroll system are checks. Employees receive individual paychecks. A payroll check is sent