Ethical Issues With a New Payroll System?


I work for in the accounting department of a company in Chicago, and we are in the process of changing our payroll system. My boss asked me to do a research paper on the ethical issues of changing a payroll system. I am familiar with ethics and what it means, but I just cannot see what the issues are for this particular situation. Any suggestions?

Michelle Jasper
Chicago, Ill.


I admire the company management for asking this question!

Changing the payroll system sounds innocent enough, but you might start by seeing if a new payroll system could get you into trouble with the law. For example, would the new system enable the company to pay for overtime, properly handle certain deductions (e.g., for state income taxes) in various states where the company has employees, etc. Beyond these, if the new payroll system allows different people access to information, are there privacy laws that might be violated in the way the new system is managed?

Most people go beyond the law to appropriate behavior in their definition of ethics. In this case, you might ask if there are proper checks and balances in the way this sensitive data is handled. Any new system introduces change, and some people may feel violated by this change. For example, a payroll system that used to pay by the hour may now pay by the month or year. This can lead to slightly different pay for people because of a differing number of hours in a work year, for example. Does the new system do only direct deposit, and will people who want to get a paycheck be unhappy? If the company decides to go to all direct deposit, that’s fine, but the way people are valued in the discussions of this and other transition issues can be an ethics issue. If the new system is outsourced, and the old one was done internally, how is the loss of jobs being handled? For people working with the new system, are they getting appropriate training?

Both of these aspects of business ethics can be associated with “damage control,” or staying out of trouble. We also think of business ethics in terms of “mission control,” doing what is positive in creating a great culture in the company. In this case, you might ask whether the people closest to the system were involved in the decision to switch, or was the new system selected because it is run by some executive’s brother? Arbitrary decisions of this kind can create morale issues in an organization and stifle innovation. Anytime a new system is put in, it can be expected to do some things much better than the old one (maybe it just costs less!) and some things less well than the old one. For example, a company may allow flexible schedules where a person works 80 hours in nine days over a two-week period, getting an extra day off every two weeks. Some new payroll systems do not support this kind of a feature. How does the company think about creating a positive morale in the face of such issues?

This is just a start of thinking about ethical implications for a new payroll system. I hope this was helpful.


Al Erisman
Executive Editor

Kenman Wong, the usual editor of this section, is on vacation.

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