Main Topic: Payroll and Personnel Function

Key Branches or subtopics:

1. Personnel Function
2. Timekeeping Funtion
3. Payroll Preparation
4. Payment preparation and payout
5. Deductions: Payment and recording

Specific details:

1. Personnel function:
Control activities:
✓ Requests for the appointment or dismissal of employees should originate from the
section making the request & written motivation should be provided.
✓ Requests (written motivation) should be signed by section head (e.g. financial
manager) and countersigned by the section manager (e.g. financial director) after
reference to the budget.
✓ Specifications of the position and the skills required should be agreed by the section
& the personnel department (HR).
✓ An advertisement is placed where CV’s are requested
✓ Sound personnel practices to employ honest and competent sta
✓ Interviews conducted by panel
✓ contact references, do background checks on qualifications, and inspect online
database for criminal record
✓ Amendments to employees’ details should be promptly committed to sequenced PAF
that should be cross-referenced to supporting documents and authorised by a senior
member of the personnel section
✓Files on the PAFs should be reviewed for validity and gaps in sequence from time to
time
✓ A record or file should be kept for all employees:
✓copy of PAF,
✓employment contract,
✓performance appraisals & disciplinary warnings,
✓personal details (qualification and background info)
Changes:
✓ Changes to salaries, pay rates, promotions, and any other changes in service
conditions, should be decided upon by the personnel department (HR)/wage committee
(bigger entities) after:
✓ due consultation with interested parties, e.g. the union representatives
✓ consideration of relevant laws and regulations, e.g. overtime, pay rates, minimum
wage regulations.
✓ Changes should be documented and authorised (signed) by the authorising body
(HR/wage committee)
✓ Changes/amendments
– recorded in sequenced payroll amendment forms (PAF)
– cross-referenced to supporting documentation &
– authorised/signed by senior HR member in personnel
 – files on the PAFs should be reviewed for validity and gaps in sequence from time to
time
– PAF’s should be reviewed for validity by a senior HR member of the personnel section
2. Timekeeping Function:
Control Activities:
✓ Entrances / exits to the workplace must be:
✓Limited (preferably one)
✓Protected by a tollgate / turn-style mechanism / access card
✓Supervision during clocking periods by a security guard
✓ Pre-printed, properly designed, sequenced clock cards to be prepared by the
personnel department (HR) – according to an authorised list of employees, placed on
rack at entry point
✓ Blank clock cards are to be subject to strict stationary controls
✓ At the end of the wage period, the section administration clerk must collect all the
clock cards (or timesheets) and:
✓Compare/agree the number of clock cards with the number of employees in the
section in employee list
✓ At the end of the wage period, the section administration clerk should collect all the
clock cards (or timesheets) for period and:
✓Compare/agree the number of clock cards with the number of employees in the
section (employee list)
✓Calculate the ordinary hours worked
✓Calculate the overtime worked
✓Divide the clock cards in workable batches
✓Complete a batch control sheet
✓Entering batch identification details
✓Entering control totals
✓Sign to acknowledge responsibility
✓ Before the batch of clock cards is transferred to payroll preparation, the section
head(s) should
✓check calculations,
✓authorize overtime and
✓sign the batch control sheet.
✓ Details of the batch should be entered in a batch register, which will accompany the
clock cards to payroll preparation
3. Payroll Preparation:
Control Activities:
✓ On receipt of the batch of wage cards , the wage clerk should check details of batches
received, e.g. number of batches, number of cards… and sign the register to
acknowledge receipt of the batches.
✓ The wage clerk should prepare:
✓the payroll
✓a coinage schedule (for cash payments)
✓a reconciliation of the di erence between the prior periods wages and the current
periods wages for # of employees, net wages and deductions
✓a record of control totals including normal hours and overtime hours per section.
✓ A supervisor or second wage clerk should:
 ✓verify hours and rates used in compiling the payroll against the clock cards and the
employee list
✓verify deductions against the relevant tables
✓verify amendments to the payroll against the PAFs and vice versa
✓re-perform calculations and the wage reconciliation
✓sign the payroll.
✓ The head of payroll preparation should carefully review and sign the payroll and period
to period reconciliation
✓ The payment request together with the payroll and period to period reconciliation,
should be presented to two payment signatories who should:
✓review the payroll for unusual items, e.g. large amounts, excess overtime
✓inspect for the presence of control signatures and
✓sign the payroll and reconciliation.
4. Payment Preparation and Payout:
Control Activities:
✓ The head of payroll preparation should review and sign the payroll and period-to-
period reconciliation
✓ The request for payment of wages should be presented with the payroll and period-to-
period reconciliation to two signatories who should:
✓Review the payroll for unusual items (e.g. large amounts, excessive OT)
✓Inspect for the presence of control signatories
✓Sign the payroll and reconciliation
Before:
✓ Wage packets should be made up by two wage department members (physical
security over all aspects of cash handling should be extremely tight).
✓ On delivery of the payroll and pay packets to a section, the section head should:
✓agree the number of pay packets to the payroll
✓agree control totals e.g. number of cards, total hours, on the payroll to the batch
register and
✓sign the payroll to acknowledge receipt.
✓ The pay packets and payroll should be locked away until payout.
✓ The wage payout should be conducted by at least two employees who should be
present at all times.
During:
✓ The wage payout should be conducted by at least two employees, e.g. an
independent paymaster and the section foreman, both to be present at all times.
✓ Employees should:
✓present identification e.g. o icial sta card, prior to receiving their pay packets
✓acknowledge receipt of their wage packet by signing the payroll
✓count their cash and immediately report any discrepancies to the paymaster. These
should be recorded on the payroll.
✓ Employees should not be allowed to accept a pay packet on behalf of another
employee
After:
✓ At the conclusion of the payout, the paymaster and foreman who have conducted the
payout, should:
✓agree all unclaimed pay packets to the payroll (employees who have not signed)
✓ identify clearly on the payroll, all employees for whom there is an unclaimed packet
 ✓ enter the details of unclaimed wages in an unclaimed wage register
✓ sign the payroll to acknowledge this control procedure.
✓ The unclaimed pay packets and payroll should be retained by the paymaster who
should lock them away
✓ When employees wish to collect their unclaimed wages, they must identify
themselves to the paymaster and acknowledge receipt of their pay packets by signing
the unclaimed wage register.
✓ Regular independent reconciliations of unclaimed pay packets on hand and the
unclaimed wage register should be performed and the unclaimed wage register
reviewed for unusual occurrences
✓Any wages remaining unclaimed after two weeks, should be banked and a copy of the
deposit slip attached to the unclaimed wage register and cross-referenced to the
relevant entries.
5. Deductions:Payment and recording
Control activities:
✓ Isolation of responsibilities to one employee raising and paying over deductions.
✓ A strict monthly schedule for:
✓posting the entries to raise the liabilities for the deductions
✓making the necessary payments on a timeous basis, and conducting
✓supervisory checks on the above activities should be prepared.
✓ The payroll and return forms should be presented to signatories for their scrutiny
before deductions are approved
✓ Independent timeous scrutiny of the general ledger accounts for deductions to
confirm that they are being promptly cleared, should be carried out by the financial
accountant