These payroll accounting policies and procedures serve as a basis for preparing, processing, and recording payrolls.

OFM is responsible for establishing the necessary systems, policies, and procedures for payroll preparation and accounting (Chapter 42.16 RCW). Additionally, the provisions of Title 357 WAC administered by the Department of Personnel (DOP) and collective bargaining agreements (CBAs) supplement these instructions.

This part applies to all agencies of the state of Washington unless otherwise exempted by statute or CBA and to all their payroll processing and payment systems used to pay employees’ salaries, wages, and benefits. A variety of payroll systems are used by state agencies:

Most agencies use a centralized payroll system maintained by DOP's Information Systems Division (ISD).

The community and technical colleges, The Evergreen State College, and Eastern Washington University use the Payroll Personnel Management system maintained by the Center for Information Services (CIS).

Each of the remaining universities uses its own payroll system.

Generally, an individual is an employee when the employer has the legal right to direct when, where, and how the work is done. Section 75.70 of this manual provides a more detailed definition of Salaries and Wages (Object A). There is also information on personal service contracts in Chapter 15 and Section 75.70 (Object C) covering those individuals paid by the state who are not employees.

Several definitions of "state employee" exist in statute for different purposes. However, OFM has historically used the following general definition:

For employment tax purposes, each federal and state agency that regulates employment has its own definition of "employee" based on what taxes that agency levies or collects. For example, the IRS collects federal income, OASI, and Medicare taxes. Labor and Industries (L&I), on the other hand, collects moneys for the worker’s compensation program. An individual can be an employee by one agency’s definition, but not by another’s definition.

The following federal and state agencies publish regulations or WACs that define an "employee" from their perspective:

• The Internal Revenue Service (Revenue Ruling 87-41 and Publication 15 (Circular E)).

• The Washington State Department of Labor and Industries (Chapter 296 WAC).

• The Washington State Department of Employment Security (Chapter 192 WAC and the federal/state 218 agreement).

• The Washington State Department of Revenue (Chapter 458 WAC).

If you have questions about whether a specific tax applies, contact the appropriate agency and/or your agency’s assistant attorney general. Also refer to applicable state statutes.

The term "Full Time Equivalent" (FTE) is a budgeting term used to measure one full calendar year of paid employment, or the equivalent of 2,088 hours (the number of average available work hours in a year). A staff month is equivalent to 174 hours (the average available work hours in a month).

The hours used in FTE calculations are for hours worked by state employees. While the employing agency must always pay appropriate federal and state employment taxes, state statutes may exempt certain groups from the "state employee" definition for FTE computation purposes. The following displays the various types of payroll transactions and the related requirements for FTE reporting:

*Note: Program 690 is established for the purpose of recording FTEs related to the state internship and state/federal work study programs. Expenditures related to these programs (wages, employee benefits, and FTEs) are to be charged to Program 690, "Non Budgeted FTEs," in the proper objects of expenditure. State/federal work study payments from the HECB are to be coded as interagency reimbursements to sub-object SA, by the receiving agency in Program 690. Payments for the state internship program as well as the agency's share of salaries and benefits related to the state/federal work study program are to be transferred from Program 690 to the agency's appropriate budgeted program(s) using intra-agency reimbursement sub-object TA. Total expenditures for Program 690 should be zero. FTEs are to remain in Program 690 as originally expended and are not counted towards an agency's budgeted FTEs in the state's financial system.