CHAPTER ONE

INTRODUCTION

I.0 Introduction

An information processing system for payroll management is an information system that helps users to capture, process and store payroll information for easy management. According to (Wikipedia, 2015), payroll is the sum of all financial records of salaries for an employee, wages, bonuses and deductions. In accounting, payroll refers to the amount paid to employees for services they provided during a certain period of time. Payroll plays a major role in a company for several reasons. From an accounting perspective, payroll is crucial because payroll and payroll taxes considerably affect the net income of most companies and they are subject to laws and regulations. A payroll accounting system is a computerized system that enables payroll records to be captured and computed so that it will be easy for retrieval and confirmation of supposed payment salary values for staffs. With computers now driving virtually all business activities, payroll accounting system is one of such systems that make it easy for organizations to perform payroll related information in electronic format as opposed to the manual method. For many businesses, especially service companies, labor costs comprise the largest part of operating expenses. Many labor costs are a result of various complex government regulations, and thus, the payroll accounting system can be quite complex.  First of all, it is important to distinguish between employees and contractors as payroll accounting applies only to employees of an organization. Independent contractors are not considered to be employees, and hence, they are not accounted for under a payroll system. Generally speaking, independent contracts render services for a fee and are not under supervision or control of the company.

1.1 Background of the Study

Payroll is one of the major activities in an organization since workers need to be paid daily, weekly or monthly as the case may be. To facilitate easy management of the payroll, an information processing system for payroll management is needed Payroll Management System can handle and manage complex calculations that would otherwise be prone to errors. For example, the complex calculation may take the input, rate or basic salary from the employee detail or transaction entry. The formula programmed in the system will simplify the complex calculation because it is system generated. User just have to key in the required field in the form, then employee’s pay, allowance advanced, deduction and others will be generated.

It is a type of an information processing system. In a broad scope, the term Information processing Systems is a scientific field of study that addresses the range of strategic, managerial and operational activities involved in the gathering, processing, storing, distributing and use of information, and its associated technologies, in society and organizations. The term information systems is also used to describe an organizational function that applies IS knowledge in industry, government agencies and not-for-profit organizations. Information Systems often refers to the interaction between algorithmic processes and technology. This interaction can occur within or across organizational boundaries. An information system is not only the technology an organization uses, but also the way in which the organizations interact with the technology and the way in which the technology works with the organization’s business processes. Information systems are distinct from information technology (IT) in that an information system has an information technology component that interacts with the processes components (Ken, 2001).

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