Categories

Payroll Processing and Checking

Payroll Processing and Checking

Blueprint Summary

This section provides guidelines on elements that should be in place according to best practice when processing and checking a monthly / Weekly / Fortnightly payroll cycle.

Process flow

Process Specification

Process Owner

Stakeholder(s)

Recording Requirements

Storage Requirements

Reporting Requirements

Audit Requirements

Notifications

Reminders

Transparency & Communication

Knowledge & Skills

System

Workflows

Legislation & Governance

Templates, Forms, Guides and Work Instructions


THE Process

The Process

Inputs are all of the Elements deemed necessary to complete the process successfully.

  • Payroll Policy
  • Payroll Legislation
  • Third-Party Agreements
  • Payroll Processing Schedule / Flowchart
  • Payroll Queries from the Previous Cycle
  • All cycle-specific payroll input relating to a particular cycle.
  • Application of segregation of duties.

Outputs are all of the desired Outcomes when the Process has been completed successfully.

  • Financial and Non-Financial information is captured on the system.
  • Required source documents are uploaded/sent through for payroll audit process.

Ensure that the following rules are applied with regards to segregation of duties:

  • The same individual should not have access to load banking details and payslip amount changes for the same payroll. This rule is also applicable when banking/ payslip information needs to be modified. It is therefore recommended that HR capture and modify banking details while Payroll handles any financial payslip changes.
  • If an individual loads payroll non-financial payroll input, another individual should check the input to ensure that:
    • The same employee is not active in the company more than once (Ghost employee / ID number check)
    • The same banking details are not in use for more than one employee.
    • No employees are paid before the start of their contract. (Check contract start date with the start date for payroll)
    • Banking details and the name on the proof of banking details provided match the detail captured in payroll.
    • There is a source document that meets standards as specified in the payroll policy for each banking detail change made. (Banking Detail changes Audit)
    • There are no banking detail changes for employees who have been terminated. (Although this might occur in some circumstances, it is a red flag and should be enquired into).
  • If an individual loads third-party or fund-related information on payroll, another individual should verify if:
    • The bank details for the third-party is valid according to an approved source document.
    • The amounts are correct according to the fund / third-party schedule or requisitions.
    • The employee details on the schedule match the detail for the employee on the payroll.
    • A particular area of risk here is changes to company contributions.

For Non-Financial changes, (where the task cannot be completed via Employee Self Service (ESS)) the applicable Branch/Employee will complete an Employee Change Form and provide a source document for the change (standards defined in Payroll Policy).

  • An HR Representative will verify the documents received and, if it meets Payroll Policy requirements, process the change to employee information. These include changes to:
    • Medical Aid dependent changes (Employee Information)
    • Retirement Fund nominated beneficiary changes (Employee Information)
    • Changes to personal details (Name, surname, marital status, address, etc.) (Employee Information)
    • Changes to banking details (Employee Information)
    • Changes to employment details (Employee Information)
    • Changes to Employee Organisational Details
    • Action Employee Sub-Statuses (Such as Suspension or Maternity Leave)
  • Source documents used for changes should be attached to the employee or sent through to Payroll to verify the change.
  • A Payroll Representative will verify the change and either reject it or accept it (either through Accepting the Authorisation Request or by notifying the Employee/Branch of the change).
  • The source document of the change will be used by Finance / Head of Payroll to audit before final sign-off.

Financial changes:

  • Before processing any financial changes for a period, it is important for the Payroll Representative to verify if the payroll is in the correct payroll cycle. (Payroll Management > Payroll Processing)
  • For Financial changes, a Payroll Representative will receive payroll input from different branches (Department, Division, etc.).
  • The Payroll Representative will verify if the input received complies with standards set out in the Payroll Policy.
  • If the input meets standards, the Payroll Representative will action the change on the Payroll system or add the instruction to the set of changes to be actioned in a future payroll period, if not the request will be sent back to be amended.
  • Payroll input needs to be managed using a Payroll Input Management System. This might consist of:
    • a physical file with tabs to organise payroll input or
    • a ticketing system
    • a workflow system
    • a spreadsheet
    • a digital folder structure on the administrator’s computer or an online system such as Sharepoint.
  • Changes to the process may include:
    • Accepting new Employees into payroll (As per Employee Take-On Blueprint)
    • Accepting employee termination (As per Employee Exit Blueprint)
    • Processing Employee Transfers
    • Changes to employee leave level (Annual Leave)
    • Processing employee leave records (where this is not managed through ESS) (Mass Leave Capture) and resulting leave pay.
    • Changes to Employee Package (Package & Payslip)
    • Once-off changes to Employee Payslips (Mass Payslip Adjustments) (Import & Exports)
    • Accepting Employee Sub-Statuses.
    • Review Approved Loans requested via ESS
    • Review Approved Savings requested via ESS
    • Adding Garnishee Orders (after verifying supporting documents, doing affordability assessment and consulting with the employee)
    • Medical Aid changes (Package & Payslips)
    • Retirement Fund changes (Package & Payslips)
    • Other third-party changes (Ex. Group Life, Funeral Benefit) (Package & Payslips)
    • Process Tax Directives
    • Adding Normal hours (Wage Employees) and Overtime Hours worked.
    • Reviewing any ESS Payment Requests as well as adding any Approved Claims. (If not managed through ESS) (Payment Requests)
    • Adding any other once-off transactions pertaining to a specific payroll cycle. (Mass Payslip Adjustments)
    • A Payroll Representative is required to do a Payroll Run after processing all the input that was received for a particular period, and then do a preliminary self-check to ensure that all input was accurately captured.
  • It is important to understand how leave pay is calculated in terms of the Basic Conditions of Employment Act (BCEA):
    • According to section 21(1) of the BCEA: “An employer must pay an employee leave pay at least equivalent to the remuneration that the employee would have received for working for a period equal to the period of annual leave, calculated—
      • at the employee’s rate of remuneration immediately before the beginning of the period of annual leave; and
    • in accordance with section 35.
      • Section 35(4) specifies that employers should calculate leave pay as follows:

“If an employee’s remuneration or wage is calculated, either wholly or in part, on a basis other than time or if an employee’s remuneration or wage fluctuates significantly from period to period, any payment to that employee in terms of this Act must be calculated by reference to the employee’s remuneration or wage during—

  • the preceding 13 weeks; or
  • if the employee has been in employment for a shorter period, that period.”
  • Thus, to calculate leave pay for an employee that is still employed:
    • For an employee who earns only fixed amounts such as a salary with no fluctuating income (such as overtime), the employee would simply receive his usual remuneration when going on leave.
    • If, however, the employee earned fluctuating income such as overtime, performance bonus or commission in the past 13 weeks before the annual leave is taken, the fluctuating amounts will need to be averaged out over the past 13 weeks (it is common practice to use 3 months for monthly paid employees) to reflect the Average Fluctuating Income per Working Day and this amount should be added to the employees normal daily rate for leave pay.

Payroll Queries:

  • If a previous payroll cycle has been paid and closed off, it might surface that there were errors arising either from incorrect information received, processing errors or information that was not received on time.
  • If the change is non-financial in nature (as described above), it needs to be resolved by an HR representative. If it is financial in nature (as described above), it needs to be addressed by a Payroll Representative.
  • Each payroll query needs to be investigated to determine the merits of the query. Once the origin of the mistake is discovered it is advisable to take a measure to ensure that the misunderstanding/miscommunication or other error leading to the mistake do not occur again and to then take steps to resolve it.
  • It is best practice to effect changes arising from a previous cycle in the next open payroll cycle. If the queries have a financial effect and it is necessary to make a corrective payment to an employee before the next processing cycle, this is normally calculated by a Payroll Representative, Approved by Payroll Manager or Supervisor and then sent for approval and payment through Finance. This is then Processed as an Advance in the next Payroll Cycle and regarded as part of that cycles’ Payroll Input.