 In this presentation, we will talk about payroll controls and documentation. Exempt and non-exempt employees. It's important to know these terms because the regulations will differ depending on whether an employee qualifies as exempt or non-exempt. So in other words, the employees that are exempt are not subject to the Fair Labor Standards Act, FLSA wage and hours laws. So amongst other things in particular, the overtime calculation would not be present or not be needed or required for employers given the employees who are exempt. So if they're exempt from that status, then they aren't required to have, amongst other things, an overtime calculation based on the the federal law, the Fair Labor Standards Act. Now, why would that be the case? Well, if someone is exempt, then typically we're dealing with highly skilled workers, managers, executives, individuals who we would assume have their own basic negotiation abilities. Whereas the overtime calculation is typically there in order to, or one reason it would be there is in order to make sure that advantage isn't taken of workers who do not have a lot of other options and therefore would have less choice in being able to or require to work long hours without added compensation. So exempt workers then would be workers that would typically be salary to employees. So we typically think of the higher level employees, the managers, the highly skilled workers to be salary based. Whereas the non-exempt workers were typically thinking of workers that would often be hourly based. Now it's not required, that may not be the necessary distinction, and there are some instances where someone has a salary based where we'd still want to calculate their hourly rate because we need to calculate overtime. But as a general rule in the rule we will typically follow here, if someone is a more highly skilled or an executive, then they would probably be exempt and they would have a salary income. If someone is needing to be calculating overtime on and required to calculate overtime and is non-exempt, then that would typically be an hourly worker. Some other differentiations is the exempt worker is typically going to have a college degree or possibly be more educated, possibly have more say or ability to make judgment calls within their employment, within their profession, within their job. Payroll records that the employee needs to receive, these are going to be records that the employer is required to receive from the employer. That's going to be a copy of the time card and a copy of the pay stub. These are going to be items that the employee needs to be provided with. When we talk about the pay stub, note that we could get paid with a check, a physical check or electronically. In either case, the pay stuff will typically have information more than just would be on any type of paycheck or any normal type of check stub, including usually it'll have the net pay, the gross pay for the time period, and it'll have the deductions that were withheld so that the employee can get all the information of their time there. They can see how much did they earn gross, how much was taken out, what was it taken out for, and the net check that they are actually receiving. They also typically will have on the pay stub that information in terms of the year to date number as well as just the number for this particular pay period. When considering payroll internal controls, we know that they will differ from company to company. We'll have more internal controls as companies grow because we'll need more controls in order to safeguard the payroll process, a process that can be subject to fraud. One of the major internal controls we always want to think of whenever thinking of internal controls is the separation of duties. We want to have some separation of duties so that if there is some type of fraud taking place, that it should be more likely to be caught if the payroll process has separation of duties, not one individual who is in charge of the full payroll process. We also want to make sure that there's documentation verification of employee duties, and that's going to assign responsibility to the employees. We want to make sure that we can hold individuals accountable by well defining their task and then having them sign off on the task so that we can see and verify the tasks have one happened and two who is responsible for those particular tasks. Those should be documented. Common errors that a good system of controls can prevent are going to be things like continued payment for terminated employees or even a system where employees that are no longer there were fraudulently still getting a paycheck and possibly being deposited in a similar named type of account. If there's a separation in terms of the entering of the payroll data and the distribution in some way of the pay checks, then that may be a way to help to find out these problems, meaning if we have some type of verification in the distribution process of the payroll as well as the entering of the payroll and the data input side as well as stolen pay checks stolen prior to distribution. So these are going to be just a couple things that we want to be able to safeguard against and again some problems could happen with payroll in that payroll being processed for employees that don't exist or prior employees possibly being deposited into bank accounts with similar names. Those are types of fraud that could take place as well as just errors with the the payroll never removing someone from the payroll records even after they have been terminated. Payroll documentation and retention. When considering the payroll documentation we really want to make sure that we're holding on to the payroll documentation for a good while probably longer than many other types of documentation because we want to make sure that if anything happens later on in terms of payroll we have that documentation it is very possible for something to happen in the future and us to have to look into the payroll documents. It's also something that has a bit more complexity given the fact that we are withholding information and paying various sources on behalf of the employees we want to make sure that we are in compliance with that obligation because if we're not then we have a problem not just with not paying payroll taxes but with possibly being charged with taking money from the employees and not paying their responsibilities like we basically are required to do. So we want to be very careful with the payroll tax records. Now the taxes basically mandate a seven-year recommendation which a statute of limitations for many other types of documents is like three years possibly five years. So seven years is an extended period of time it might be recommended to even hold payroll documents longer than that and if there's a case of fraud we should note that the IRS would require documentation basically indefinitely at that time. So we definitely want to make sure that we're retaining the payroll records in a secure way for a good time so that we can safeguard against any problems in the future. When disposing of payroll records we want to make sure we do it in a safe way in a secure way and typically that would include shredding or incinerating the payroll records to make sure that they don't someone doesn't get a hold of sensitive payroll information including social security numbers and other sensitive data that can be used against employees or in a harmful way. If we have the information in a database program we want to make sure that once we get rid of the information that we have purged the database and completely gotten rid of the information so once again we can be certain that that sensitive information is not being taken by or stolen.