Chapter I

Introduction
Payroll outsourcing has undergone quite a facelift since its introduction to
the business world in the first half of the 20th century. In the beginning, payroll
processing was a very manual process. It was the 1940s and the idea of
automated payroll processing services was not yet on the table. As the world
turned, automation took the wheel. In 1947, General Motors established an
automation department, tying together all the business and operating functions
of producing automobiles. But it wasnt until the late 1950s and 60s that
computer science, a requirement for scalable automation, was established as a
distinct academic discipline. In 1962, Purdue University offered the first computer
science degree program in United States. Payroll outsourcing has never been
the same since.

As computers infiltrated, technology revolutionized payroll management.

In the early 1970s through the late 80s, dozens of payroll companies began to
emerge.

Leveraging

the

latest

computer

technologies,

these

payroll

groundbreakers began developing simpler and more streamlined processes.

Payroll management was becoming easier, repetitive and scalable. By
automating payroll administration, these early payroll providers revolutionized the
payroll outsourcing industry. Payroll operating efficiency hit the ground running.
Using systems, computers and scalable processes, these payroll tycoons drove
down the cost of the business payroll function. It was now affordable for small
business owners, who wanted out of the painful payroll game, to outsource their

payroll processing and alleviate those payroll headaches. As the system got
popular,

the

system

got

legitimized.

In

1982,

the American

Payroll

Association was founded to provide education, support and representation for

payroll providers at the federal, state and local levels.

Today, there are too many companies operating in the world. Serving
approximately one-third of all businesses, personalized payroll providers offer a
suite of services that transcend simple payroll processing, including HR support,
employee benefits administration and workforce solutions.

Payroll software systems can be programmed to perform manual human

resources tasks, freeing up time for you to run or grow your business. They can
be used to archive your employee slips and monthly reports, giving you a
concrete payment history. And as an automated program, payroll systems pay
your employees on time and according to the parameters that you set, leaving
little margin for human error. An automated payroll system enables the employer
to process its payroll through a computerized system. A manual payroll system
requires that the payroll be processed by hand and is therefore a considerably
slower procedure than an automated system. The former makes payroll
processing simpler, and reduces errors, which are more likely with the manual
system.

Benefits and Features of a Payroll System

Time-keeping Transportation or Accuracy

Hourly workers are paid according to hours worked during the pay period.
The employer uses a time-keeping system to track hours and pay hourly
employees accordingly. It is critical, therefore, that each employee & time
is computed accurately. Many employers use a time clock to track work
hours. A manual payroll system requires computing the time clock data by
hand; this increases the likelihood of mistakes. The automated timekeeping system allows the employer to import time clock data into payroll
software. Once the entries are transported into the payroll software, the
software computes the time worked. All the payroll staff member has to do
is ensure the time is transported appropriately and make the necessary
edits.

Payment Calculation

The automated payroll system uses payroll software to compute all

wages. Payroll software, such as QuickBooks, PenSoft, Z-Pay, Ultipro and
Sage Peachtree calculate gross-to-net earnings based on the data the payroll
representative inputs. Therefore, the result depends on the accuracy of the
input. Thus, if a terminated employee is due severance pay but the payroll
representative neglects to make the entry, the system will not pay it. Typically,
the system is reliable so long as the entries are correct. The automated

system performs all types of payments: hourly, overtime, double-time,

salaries,

commissions,

bonuses,

pay

raises,

retroactive

pay, wage

deductions, auto payments and tuition reimbursements. Notably, the

automated system eliminates manual paycheck writing. The system
automatically generates paychecks and stubs and enables direct deposit.

Deduction Calculation

Salary and wage deductions are a necessary part of payroll processing.

The employer must take mandatory withholding from employee paychecks,
including federal income tax, Social Security tax, Medicare tax and usually
state income tax. These taxes can be time-consuming and perplexing to
compute manually. A number of rules are attached to withholding tax
calculations. With an automated payroll system, the software has the tax
rates hard-coded in the system. It calculates the withholding tax for each
employee based on the withholding conditions data input. This reduces the
likelihood of payroll tax errors, which can result in fees from the IRS and the
state taxation agency.

Record-keeping

The IRS requires employers to keep employment tax records for a

minimum of four years. Furthermore, the U.S. Department of Labor requires
payroll records to be kept for at least three years. The manual system
requires filing the necessary payroll data by hand, which consumes time and

increases clutter. Payroll software generates and stores payroll and

employment tax data.

Streamlining

An automated payroll system can help eliminate busywork by

streamlining the whole process of scheduling, record-keeping and payment.
Employees can access their records, print pay stubs and, in some cases, put
in requests for time off through an automated payroll system. Effective payroll
systems of all kinds can be standardized and streamlined with advance
directions. You can direct third-party administrators, automated systems and
in-house bookkeepers to deposit earnings directly into employees' bank
accounts, eliminating the need for you to write personal checks. You can
automate systems to alert you when employees are going into overtime pay
or when employees pass a certain amount of allocated time off, what
percentage of 401(k) matching payments you authorize and how much to
take out for health care premiums.
Background of the Study

Statement of the Problem

General Problem
The Ariel Claudio Rodriguez Co Builders is having a hard time in
manually checking each daily time record of workers, computing the
payroll, monitoring of previous payroll records, cash advances and
preparing essential reports.
Specific Problem

The Ariel Claudio Rodriguez Co Builders timekeeper consumes much time

and effort in manually checking each daily time record of the workers.

The Ariel Claudio Rodriguez Co Builders timekeeper always consumes

much time just for manually computing the payroll of the workers.

The timekeeper having a problem sometimes in which hes losing some

previous records or data, like when a worker asking for the records of their
cash advances.

Objective of the Study

General Objective
To design and develop an automated payroll system for Ariel
Claudio Rodriguez Co Builders that provides faster calculation for their payroll,
minimize the manual checking of timekeeper for workers daily record, monitors
previous payroll records and cash advances.
Specific Objective

To help the timekeeper minimize the time and effort he consume for
manually checking each daily time records of workers.

To help the timekeeper reduce his effort in manually doing the calculation
for the payroll of workers.

To develop a system that can secure and store data to have more
manageable files in case of needs.

To develop a module that can generate essential reports.

Significance of the Study

Benefits for future students

The system research may be used by future students as reference

data in conducting new researches or in testing the validity of other related
findings. This study will also serve as their cross-reference or guide for
making their assignments, project or thesis.

Benefits for client

Ariel Claudio Rodriguez Co Builders will greatly benefit with the

proponents study because they dont need to hire any programmers to do
working their system. The proponents will develop their system. So the
proponents ask for the support of the company. This will lead in lessening
the expenses of the company which can be used in their other expenses.
They will also find it easier to do task with the system like this wherein
they can assure that their time keeping system is secured.

Benefits for proponents

The proponents will gain knowledge about the business system

existing inside a Finance office, with this; skills in system analysis will be
improved and also it helps the future researcher to have an idea about
payroll system and develop their own system. They can learn about the
proponents system and at the same time develop a greater system with
the help of the proponents study. It will also help the proponents to pass
the System Analysis and Design subject which is one of the requirements.

Scope and Limitation

Scope
The proposed system Time Keeping and Payroll System for Ariel Claudio
Rodriguez Co Builders covers many aspects of time keeping and payroll process.
This includes the capture of information based on the employees work schedule,
daily time worked and daily time rendered. The payroll process encompasses all
activities necessary to report employees time worked. The system will convert
the current companys time keeping and payroll into Visual Basic Program. It also
covers the process of preparing the pay slip for each worker, cash advances,
keeping the records and easily computes the basic pay, regular or overtime pay,
canteen and savings for the payroll. The system will have a file management
where it covers all the records of the workers. The system will have a report
consist of summary of time sheet, canteen, savings and summary of payroll
computation.
Limitation
The workers salary will not be sent through Automated Teller Machine
(ATMs) or cheques, for the reason that the company insisted that salaries must
be on a cash basis. No other currencies are computed in the system but

Philippine Peso only. The proposed system cannot be accessed online and it
focuses only on the workers time keeping and payroll System of the Ariel Claudio
Rodriguez Co Builders. This proposed system is only applicable and can only be
used by the management of Ariel Claudio Rodriguez Co Builders.
Definition of Terms
Basic Pay
This refers to monthly rate divided by the number of working days
multiplied by the number of days worked.
Daily Time Record
This refers to a record of how a persons time has been spent. It issued to
calculate pay, asses the efficient use of time, or charge for work done.
Database
This refers to a organized collection of data for one or more purposes, it is
usually in digital form.
Days Worked
This refers to the actual days worked by an employee, often well in excess
of those stated in the contract of employment and sometimes without the
payment of overtime.
Deduction

This refers to business expenses or losses which are legally permitted to

be subtracted from the gross revenue of a firm in computing its taxable income.

Worker
This refers to a person who is hired to provide services to accompany on a
regular basis in exchange for compensation.
Gross Pay
This refers to total of an employees regular remuneration including
allowances, overtime pay, commissions and bonuses, etc. before any deductions
are made.
Net Pay
This refers to the remaining amount of an employees gross pay, after
deductions, such as taxes and retirement contributions, are made.
Payroll
This refers to a 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.
Pay slip

This refers to a detailed breakdown on how much an employee is paid

during a Specific period.

Report
This refers to give an official account or statement of as a treasurer report
the receipts and expenditures.
Salary
This refers to wages received on a regular basis, usually weekly, bi-weekly
or monthly
Cash Advance
Is a short-term loan from a bank or alternative lender. The term also refers
to a service provided by many credit card issuers allowing cardholders to
withdraw a certain amount of cash, either through an ATM or directly from a bank
or other finance agency.
Timekeeper
A person who records the amount of time that people taking part in a race
or competition take to finish the race or competition, or the amount of time that
people at work spend working on their jobs.