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Payroll Cycle - Coggle Diagram

- - - - Documentation used
        
        Updated list of employee details
        
        Employee’s file
        
        Payroll amendment forms
  - - - Changes to pay rates, promotions to higher employment grades and any other changes in service conditions should be decided upon by the human resource department after consultation with all interested parties (e.g. unions) and consideration of relevant laws and regulations (e.g. minimum wage regulations).
    - - All appointments and dismissals/resignations should be authorized and approved by a senior official on supporting documentation.
    - - All amendments should be recorded on sequentially pre-numbered payroll amendment forms and supported by further documentation. These documents should also be authorised and signed by senior management.
    - - All applicants should be interviewed, and the head of the department in which the applicant is going to work should be present.
    - - All of the above documents should be maintained in each employee file.
    - - All changes should be documented and approved by the authorising body (e.g. wage committee).*
- - - - Documentation used
        
        Hours recorded on clock
        
        Batch Control Sheet and Batch Register
        
        Blank clock cards
    - - Wage earners, on the other hand, get paid weekly and their remuneration will vary depending on the hours that they have worked during that specific week.
      - This function is mainly relevant to wage earners, as salary earners usually get paid a fixed amount at the end of the month.
  - - - Place the clocking machine at the entrance/exit and supervise employee clocking to prevent absenteeism.
    - - Ensure personnel record their time worked, sign clock cards, and have the foreman's card approved by a senior official.
    - - The access point must have a turnstile mechanism and be supervised during clocking periods
    - - The factory manager or foreman authorizes company policy compliance and overtime respectively.
    - - Clock cards must be numbered and kept at the clock machine under supervision, issued by personnel department from personnel records.
  - - - Assign different individuals to prepare timesheets, review them, and authorize payments.
    - - Implement periodic audits
    - - Introduce a reconciliation process to verify timesheets with attendance records or supporting documentation.
    - - Conduct periodic reviews of the payroll system for inefficiencies and improvements.
    - - Establish clear overtime authorization policy.
    - - Implement a timekeeping system with biometric or card-based clock-in/clock-out functionality.
    - - Employees should sign the payroll as proof of receipt
      - The foreman should identify employees but not conduct the payout
      - The foreman should sign the payroll after payout as proof of supervision and employee identification.
      - Payout should be handled by personnel not involved in wage compilation
- - - - Documentation used
        
        Updated list of employees
        
        Payroll (wage journal)
        
        Clock cards
        
        Week to week reconciliation
- - - - Documentation used
        
        Payslips
        
        Paypackets
        
        Payroll
        
        Unclaimed wages register
        
        Authorised payroll
  - - - Cash handling for payroll should involve two wage department members, tight physical security, independent persons, and independent review of wage details and money in the wage-packet.
    - - Payroll should be handled by personnel not involved in wage compilation, with employees and the foreman signing as proof of receipt and supervision, respectively.
    - - After payouts, the paymaster and foreman must agree on unclaimed pay and enter details in a register, which should be regularly reconciled and reviewed for anomalies, and unclaimed wages must be locked away and deposited after two weeks.
    - - It's better to use a security company for wage payouts when the payments are made by multiple people, irregularly, and not on the same route.
    - - To ensure secure electronic payment processing, open a separate checking account, use two-factor authentication, have senior management review and approve all transfers, save employees' bank details as beneficiaries, and monitor online bank statement activity.
    - - Before payment is made, the EFT schedule, payroll, and supporting documents must be presented to cheque signatories for authorization, compared by a senior employee, and verified for validity of changes, and once approved, signed/stamped as cancelled.
- - - - Documentation used
        
        Payroll (wage journal)
        
        Cash payments journal
        
        General ledger
        
        Return form
- - - - Control
        
        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 EFT paid over to the employee and the EFT paid over to the relevant authorities.
        
        Select a sample of payroll runs and:
        
        -Compare the payroll totals with the wage EFT schedule and EFTs iro other deductions
        
        -Follow through to EFT / any proof of payment and ensure that two cheque signatories have signed as evidence of review and authorisation for payment.
        
        Test of Controls
  - - - Control
        
        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.
        
        Re-perform all castings and calculations. Agree your calculations with those recorded in a sample of payroll. Follow any deviations with management
        
        Before payments can be authorised, senior personnel, should inspect the payroll and week-to-week reconciliations need to be performed
        
        Inspect a sample of payroll runs for evidence of review. Follow any deviations with management
        
        The wage rates, deductions should be obtained from personnel records or master files.
        
        From a payroll run select a sample of employees. For these employees match the wage rates used and other deductions to their respective personnel records. Follow any deviations with management.
        
        All personnel should sign payroll as proof of functions performed
        
        Inspect management’s payroll reconciliations. Follow any deviations with management.
        
        Through enquiry of management, gain an understand of different functions performed and by whom they are performed
        
        Select a sample of payroll runs and inspect for different functions performed by verifying various signatures
        
        Follow any deviations with management
        
        The hours recorded on the payroll should be obtained directly from the clock card machine report or computer-transaction file.
        
        From a payroll run, select a sample of recorded hours. Match these hours to a clock-card machine report or computer-transaction file. Follow any deviations with management.
  - - - Control
        
        During the wage payout, 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.
        
        Attend on a surprise basis the wages payout in order to verify the validity of employees on the payroll, and observe compliance with the listed procedures.
        
        Observe whether each employee collects their own payment and signs for it.
        
        Test of Controls
        
        There should be sufficient segregation of duties in the payroll cycle, and sufficiently documented procedures with regard to granting of staff loans.
        
        Enquire of personnel regarding the following:
        
        The level of segregation of duties in the payroll cycle
        
        The procedures regarding staff loans and compliance to laid down procedures
        
        Inspect policy on granting of staff loans
        
        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
        
        Inspect policy regarding clocking in of employees, the preparation of the payroll and the payment of wages
        
        Observe the procedures i.r.o.:
        
        Preparation of the pay-roll
        
        The make-up and payout of wages
        
        Clocking in of employees
        
        Through enquiry and observation, confirm that the procedures are complied with, and that sufficient controls and segregation of duties exist
  - - - Control
        
        A strict monthly schedule should be developed for:
        
        Making the necessary payments on a timeous basis, and
        
        Select a few months and inspect that entries are raised on time
        
        Supervisory checks on the above activities
        
        For the same sample confirm through inspection that liabilities are settled timeously
        
        Follow any deviations with management.
        
        Posting the entries to raise the liabilities for the deductions
        
        Request and inspect the policy on how and when liabilities are raised and then paid
  - - - Control
        
        The total wages, deductions and payroll are reviewed by senior employee, and signed as evidence of this check.
        
        Inspect the payroll for signature of the senior official evidencing for proof of review and approval
        
        Test of Controls
        
        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
        
        Select a sample of employee files and
        
        Inspect the documentation in the employee’s personnel file, employee contract, identity details, tax form etc. Ensure that documentation is complete.
        
        By observation, physically verify employees
        
        Enquire of the foreman to vouch for the validity of staff whom you have not physically verified.