Unit 5 Payroll Function and the Human Resource Function

Functions

  1. The human resources (HR) function;

  1. The timekeeping function;

  1. The payroll preparation function;

  1. The payment preparation and pay-out function; and

  1. The deductions: payments and recording function.

Documents

• Employee’s file

• Payroll amendment forms

• Updated list of employee details.

Documents

• Blank clock cards;

• Hours recorded on clock;

• Batch control sheet and batch register.

Documents

• Clock cards

• Updated list of employees;

• Payroll (wage journal)

• Week to week reconciliation.

Documents

• Authorised payroll;

• Payroll;

• Payslips;

• Pay-packets;

• Unclaimed wages register.

Documents

• General ledger;

• Payroll (wage journal);

• Cash payments journal;

• Return form.

General Controls

• Supervision and review by management;

• Segregation of duties;

• Rotation of duties;

• Personnel take leave regularly;

• Internal audit function;

• Sufficient stationery control;

• Scrutinise all records and documents for extraordinary/unusual items;

• Test castings and calculations on all selected items, documents and ledger

accounts.

Example

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Control objectives and internal controls to mitigate risk

Validity and authorisation

  1. The total wages, deductions and payroll are reviewed by senior employee, and signed as evidence of this check. 

  2. There should be complete records kept for every employee, in the employee file. Further, the foreman should be aware of the number of employees working under him.

Completeness

Weaknesses, risks and internal controls

• End of the month pay 31 employees but we only have 29 employees, then we need to question who authorised those payments as well as how those payments were authorised without valid supporting documentation.

• Paying employees that do not have a permanent employee file and therefore those payments should never have been authorised and they were not valid.

• Foreman should know exactly how many employees are working with him and that should be compared to the amount of payments as well as employee files that we have.

All valid payroll transactions are recorded and nothing is left out. 

  1. During the wage pay-out, every employee should collect only his own pay packet, and should sign once payment has been collected. Employees should not be allowed to collect payments on behalf of other employees.

  1. There should be sufficient segregation of duties in the payroll cycle, and sufficiently documented procedures with regard to granting of staff loans.

  1. There should be strict and tight controls over the clocking in of employees, the preparation of the payroll and the payment of the wages, as described above in the module.

Accuracy

  1. The Human Resources manager should review and authorisation (via signature) the payroll after performing the following:
    • The total per the payroll agrees to the sum of the wage cheque paid over to the employee and the cheque paid over to the relevant authorities

Recording

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All purchase transactions are correctly recorded.

  1. The hours recorded on the payroll should be obtained directly from the clock card machine report or computer-transaction file.

  1. The wage rates, deductions should be obtained from personnel records or master files.

  1. The calculations and castings should be reviewed by an independent person (e.g.one wage clerk checks another clerks work/edit checks). The reviewer needs to sign as evidence of review.

  1. Before payments can be authorised, senior personnel, should inspect  the payroll and week- to-week reconciliations need to be performed.

  1. All personnel should sign payroll as proof of functions performed.

Cut off

All payroll transactions are recorded in the correct reporting period.

  1. Strict monthly schedule should be developed for

• Posting the entries to raise the liabilities for the deductions,

• Making the necessary payments on a timeous basis, and

• Supervisory checks on the above activities

All recorded wages are valid and supported by proper documentation.

Payroll transaction are shown at the correct amounts.