Introduction
The payroll function of an organization is primarily concerned with employee compensation. A common misunderstanding is that the human resources department is responsible for a company’s payroll function. However, a business should have a different department for payroll to ensure effectiveness and efficiency in the function. On this note, the two departments have unique functions although there are some roles that they share in a firm. The rationale for sharing some of the roles is to ensure that the organization is provided with the ideal atmosphere that will motivate the workers to optimize their performance and productivity in the workplace. On this note, the payroll function is essential because it is one of the primary motivators for the staff to improve on their contribution to the success of the organization. In addition, the payroll function is informed by internal processes that should focus on different aspects of the organization. The report will focus on an organization that employs over a hundred workers in differing capacities including senior managers, supervisors, regular workers, and lower level workers. In this regard, the payroll function is one of the critical departments of an organization because it focuses on motivating the staff and augmenting employee satisfaction.
The Payroll Function
Payment Method
The organization provides a number of options for the workers. On this note, people with different wage levels have varying preferences on the method of payment that the company should apply. Senior managers are usually paid through cheques, which they can deposit in different banks. Precisely, the use of cheques has been noted for its ease of use because the company does not have to handle a lot of liquid cash, which presents various risks. Succinctly, because the senior managers are paid higher sums of money, which can be risky and attract some unwanted actions such as theft and robbery, the organization prefers to pay them with cheques (Diller, Spath, & Lorenz 2019). Furthermore, because they are fewer than the other groups of employees, handling the cheques is relatively easy for the company’s payroll function department.
Lower level managers and regular workers are usually paid through bank transfers. One of the rationales used by the organization in the determination of the payment method is the number of people who are to be paid. On this note, the bulk of the employees falls into this group and it would be very problematic if the department has to write cheques for every worker. On this note, the organization has made arrangements with its bank to distribute the payments of the workers to their individual banks. Precisely, this is relatively easy because the payroll department will only need to ensure that it deposits a certain amount of money in its bank and the rest is the responsibility of the financial institution. However, the department will have to ascertain that it keeps updated records of all the employees and the amount that they are due to be paid (Burda & Weder 2016). On this note, using bank transfers is efficient when the department is dealing with large groups of people who need to be paid promptly.
The payroll department is also responsible for disseminating compensative to subordinate employees and contractors. On this note, the two groups of employees are not considered permanent and most of them work for a short period for the company. Concisely, they are paid depending on the work and output they have contributed to the operations of the company. The department has provided them with flexible means of being paid. Concisely, they can choose to be paid through cheques or cash although they do not have the option of bank transfers. The reason why they are not provided with the bank transfer option is that it requires a lot of documentation, which is not viable for a short-term employment (Driskill & Vrooman, 2017). Concisely, the use of cheques and cash is very convenient for both the department and the employees.
Procedures
The business engages in a number of steps when developing the payroll of different employees. The first step is updating the employee master database. On this note, the payroll clerk is responsible for consulting with different departments and identifying the changes in the size of the staff. The other step is setting the pay period. Precisely, the organization needs to pay its employees regularly and therefore, the department is responsible for ensuring that there is a particular date set for paying the workforce. The organization has chosen to pay on a monthly basis for its regular employees. On the other hand, subordinate and contractual workers are usually paid based on agreed upon periods (Madhavi 2017). For instance, subordinate workers can agree to receive their payments every weekend while contractors usually request their payments upon completion of their contracts or gradually if it is a large project.
The other step is calculating the deductions that employees are liable for in their compensation. There are fixed and variable deductions that the department must ensure it puts into consideration. Precisely, fixed deductions include contributions to the welfare of the entire workforce. They include aspects such as taxes and medical insurance and they are usually fixed and need announcements to the entire workforce when changed (Burda & Weder 2016). On the other hand, there are variable contributions including charitable contributions and helping colleagues who need financial assistance. Concisely, it is the duty of the payroll function department to ascertain that it institutes all deductions before the final pay is calculated.
Another important internal procedure of the payroll function is the review of reports. After the step of payments calculations, they are processed through a payroll software. The department is responsible for documenting the payments in both hard and soft copies. Hence, they are printed and the transactions reviewed for errors. If there are any mistakes or errors, such as the number of employees to be paid and the amount, the department processes the payroll again and the procedure repeated (Diller et al. 2019). If there are no issues found, then the payments are issued using the different methods for various employees.
The final step is depositing the taxes and medical insurance of eligible employees. On this note, the government has provided various means of depositing taxes and the company has chosen to write a cheque accounting for all employees’ contributions. Moreover, the company sends the insurance company a cheque that accounts for all employees’ contribution. However, some of the employees’ taxes and medical insurances are not the responsibility of the firm. Succinctly, casual workers and contractors have to deposit their own taxes and medical insurance. This is essential because they are not permanent and including them would increase the workload of the payroll department (Madhavi 2017). Concisely, the exclusion of the casual workers and contractors is essential because it ascertains that the company is exempt of the obligation of accounting for the deduction of temporary employees.
The internal processes also incorporate the storage of timecards. On this note, the payroll department is responsible for filing time cards. The storage of timecards is critical in resolving issues that may arise from different perspectives. For instance, some employees may question their pay and the timecards are used in highlighting the payments done and also ascertaining that the payments were sent through the applicable methods. However, after a few months the timecards are stored in longer-term platforms to allow space for the latest ones. Moreover, the payroll department is also responsible for ascertaining that all errors are investigated. Payroll processing is vulnerable to various problems and the department should ensure that the workforce does find the problems (Driskill & Vrooman, 2017). Therefore, the payroll department is responsible for ascertaining that all errors are eliminated and changes initiated to mitigate future occurrences.
Payroll Audit
The payroll audit plays an influential role in ascertaining the compensation of the workforce is streamlined and does not incorporate many errors. Briefly, it is an analytical tool that augments accuracy. The company uses the audit tool in the examination of various factors such as tax withholdings, wages, pay rates, and the number of active employees. The firm conducts the audit annually at the start of every financial year. Consequently, the payroll department is assured that the process is updated and complies with various government, legal, and agency regulations. The firm payroll auditing is an internal process, which means it is the responsibility of the department (Burda & Weder 2016). One of the crucial benefits of the audit is that it mitigates the occurrence of errors and prevents additional costs associated with external audits.
The payroll audit incorporates a number of processes. The first thing that the payroll department does is to look into the all the employees listed on the payroll. On this note, the employees that must be included in the payroll must have worked for the firm during the time period under analysis. The department must ensure that the numbers align with the workforce that contributed to the organization. If the number of employees exceed those on the payroll, a review needs to be conducted to ascertain the pay role is not misleading. Care is taken to ensure that employee fraud is eliminated. Some workers commit fraud by including fake employees. Furthermore, the department can forget to remove terminated workers, which increases the number of employees eligible for the durations pay (Driskill & Vrooman, 2017). On this note, checking and verifying the number of employees is an essential step in the auditing procedure.
The next step involves analysis of the numbers. In this regard, the payroll incorporates a number of numbers including total pay, hours, hour rate, and taxes. Therefore, the audit should put into consideration all the employees’ payrolls and review them for errors. The next step involves the verification of time. On this note, the organization gives some employees time-off, which can be unpaid or paid depending on the various factors. The department has to ensure that all employees dates and times are correct to avoid over or under compensating some workers. Consequently, the department reconciles the payroll by comparing the current findings with other records and amend any discrepancies. Furthermore, reconciliation should also put into consideration the bank statements. Eventually, the department confirms tax withholdings and remittance and review them for accuracy (Madhavi 2017). Concisely, payroll audit is a critical internal procedure that need careful planning to avoid the necessary costs associated with failure to comply with legal agencies and consequently the need to apply external audits.
Payroll Outputs
Payroll outputs refers to the reports that are generated by the software. The system used by the company processes the reports in the background and does not provide any prompts. In this regard, it is essential to note that it is the duty of the department to ascertain that the set-up steps are adhered to strictly to avoid any mistakes. One of the steps used in the payroll output is setting up the output monitor portlet. The portlet allows the department’s staff to track the process by displaying some crucial information including the time the process started. Moreover, the department have to selecting a report profile for the entire output (Diller et al. 2019). On this note, the system is efficient in ascertaining that all the reports are processed in the ideal way to avoid issues such as errors and mistakes that may affect future payrolls.
The department is also responsible for reviewing pertinent information before printing the reports. For instance, information such as payments to be made with every payroll in should be verified to ensure that all workers pay their taxes and medical insurance contributions. Furthermore, there are people who are not eligible for being deducted because of the nature of their jobs and therefore the staff should choose the make no payment options. Other critical information includes the liabilities of every employee during the period and non-refunded obligations to the employees (Driskill & Vrooman, 2017). Precisely, this process of printing getting the output of the payroll system are essential in future auditing because the department has documented all the required information.
Payroll Quality
The company faces some payroll challenges like many other companies around the globe. On this note, the company has invested in quality assurance to ascertain that the payroll serves its purpose in the ideal means. Precisely, one of the quality assurances steps that the company has engaged in is ascertaining that it has the right skills and resources for the management of the payroll. For example, the company has invested in recruitment and training programs that enhances the execution of the payroll. In addition, the firm also ascertains that it keeps the systems updated to avoid any issues arising from outdated software (Madhavi 2017). Moreover, since the payroll system contains the database of all employees, the organization has ascertained that it is protected from vulnerabilities such as hacking. On this note, the payroll quality meets the recommended standards by various government and international organizations.
However, there are still discrepancies regarding the output for casual and contractual workers. In this regard, most of the outputs do not put into consideration various factors of the work group and therefore, there is insufficient data about them (Burda & Weder 2016). Furthermore, the lack of consistency of the information regarding this work group indicates that the payment is not equal, which has elicited some conflicts.
Conclusion
The firm’s payroll function adheres to the recommended standards although there are some discrepancies that need to be addressed. For instance, it is essential to note that some workgroups are not considered in the output, which has led to insufficient data. Nonetheless, the organization has instituted the ideal internal processes and procedures to ascertain that it serves the operations in a positive manner. For instance, the process conducted by the department ascertains that the organization is in a position to effectively identify and rectify any anomalies in the payment process. Moreover, regular auditing has played a pivotal role in making sure that all periods are accounted for effectively. Concisely, the outputs and quality of the payroll system are instrumental in the performance of the entire organizations.
Recommendations
- The payroll and human resources department should work together to ensure that the need for employee motivation are served by the reward system of the company. In this regard, the HRM should provide insights on how the payroll should be improved to ascertain that all employees are satisfied with their jobs.
- The issue of casual and contractors should be addressed to ascertain that sufficient data is provided to the department. Precisely, one of the problems associated with insufficient data is that some services offered to the organization are usually overcharged whenever it contracts new providers. On this note, the records should be applied in making certain that the organization has the ability to refer to previous payments to avoid this problem.
- Proper documentation is crucial to the payroll function. Therefore, the department should ensure that it can access information ranging from different periods. For instance, in relation to the service provision, the organization can refer to the costs as long as ten years and come up with the ideal means of identifying the fair prices for the current financial year.
Bibliography
Burda, M.C. and Weder, M., 2016. Payroll taxes, social insurance, and business cycles. Journal of the European Economic Association, 14(2), pp.438-467.
Diller, M., Späth, T. and Lorenz, J., 2019. Inheritance tax planning with uncertain future payroll expenses: an analytical solution to the optimal choice between full and standard exemption. Journal of Business Economics, pp.1-28.
Driskill, R. and Vrooman, J., 2017. Talent Versus Payroll as Strategic Variables in Game Theoretic Models of Sports Leagues: Response to Madden. Journal of Sports Economics, 18(6), pp.638-646.
Madhavi, E.V., 2017. A Conceptual Framework on HR Outsourcing, with Special Reference to Payroll Outsourcing. Evidence Based Management, p.188.