Does the block of code in a stored procedure execute as a transaction?

I need to "manually" keep a sequence for each row of the employee table,
i.e., I don't want to use postgres's built-in sequences for this
application because the sequence numbers are used to generate expense
report numbers on a "per-employee" basis. That is, each employee has a
separate sequence counter, starting at one, to number their expense
reports. Since employees will come and go, I don't want to keep having to
create and delete postgres sequence objects as employees come and go.

Instead, I have a column of the employee table store the "last value" of
the corresponding expense report sequence counter, and in an ON INSERT
trigger to the expense report table, I call the following function to get
and increment the new sequence value:

CREATE OR REPLACE FUNCTION paid.expense_report_next(int4) RETURNS integer
AS '
DECLARE
l_employee_pk ALIAS FOR $1;
l_expense_report_seq INTEGER;
BEGIN
SELECT INTO l_expense_report_seq expense_report_seq+1
FROM employee
WHERE employee_pk = l_employee_pk;

UPDATE employee
SET expense_report_seq = l_expense_report_seq
WHERE employee_pk = l_employee_pk;
RETURN l_expense_report_seq;
END;' LANGUAGE 'plpgsql' VOLATILE;

What I need to know is whether or not this is multi-user safe, i.e., will
the block of code in the procedure execute as a transaction so that if
more than one clerk creates an expense report for the same employee
simultaneously is it possible or impossible that value of the
employee.expense_report_seq gets updated by the second clerk between the
SELECT and UPDATE statements invoked by the first clerk?

And as a follow-up, should I add the FOR UPDATE clause to the SELECT
statement?

~Berend Tober