© 2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Accounting Information & Reporting Systems by A. Aseervatham and D. Anandarajah. Slides prepared by Kaye.

© 2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Accounting Information & Reporting Systems by A. Aseervatham and D. Anandarajah. Slides

prepared by Kaye Watson.14-1

chapter

1414The payroll cycle

Learning objectives–To learn about the human resource management (HRM) business activities and the payroll cycle business activities.–To learn to flow chart HRM business activities and payroll cycle business activities.–To understand the processing of HRM and payroll cycle transactions using computers.–To know the control practices and procedures in HRM and the payroll cycle.



key termskey terms• annual leave • awards • clock card• employee earnings

record• human resource

management• leave loading

• long service leave• payroll register• payroll tax• rate of pay • sick leave• time sheet



Human resource managementHuman resource management

• Is responsible for hiring personnel• Advertises and assists in the selection

process• Facilitates location of people• Is involved in personnel development and

performance• Employee discipline and terminations



HRM objectivesHRM objectives

Motivation to maintain profitability and flexibility for long-term business survival by achieving:

– organisational productivity– increased quality of work– improved quality of working life– statutory and legal compliance



HRM activitiesHRM activities

• Determine rates of pay• Maintain employee details• Determine employee authorised deductions• Develop and enforce appropriate human

resource policies• Provide advice and information on HR issues



Rates of payRates of pay

The reward for labour may be based on:• Supply and demand (high-income earners)• Award rates

– minimum wage rates and conditions set out in a legal document

• Independent negotiations for employees not covered by awards



Maintenance of employee detailsMaintenance of employee details

• Permanent information kept on a record card:– permanent records include full name, date of

birth ,award, position etc.

• Payroll register and earnings records:– also details of wages paid to date in current

payroll period



Employee authorised deductionsEmployee authorised deductions

• Employees may request a portion of their remuneration be periodically remitted to an organisation or agency on their behalf

• Examples:– private medical fund payments– mortgage payment – rent– union fees etc.



Payroll cycle business activitiesPayroll cycle business activities

• Gathering time and attendance data• Calculation of gross amount of wages payable• Tax computation• Preparation of payroll records• Disbursement of payroll• Disbursement of PAYG, superannuation and

deductions• Issue payment summaries and pay advice• Pay other payroll related expenses



The gathering of time and The gathering of time and attendance dataattendance data

Methods commonly used:• Clock cards• Time sheets• Timebooks



The calculation of the gross The calculation of the gross amount payableamount payableGross pay consists of:• pay for normal hours worked• pay for overtime worked• commissions• incentive pay• other allowances



Tax computationTax computation

• Employer must register with ATO as a PAYG withholding entity

• Must withhold appropriate amount of tax from each employee’s pay

• PAYG withheld must be paid at stipulated time to the ATO



Disbursement of payrollDisbursement of payroll

• Payment usually from payroll bank account by:– cash– cheque– electronic bank transfers

• Taxes, superannuation and other deductions must be forwarded by stipulated dates to appropriate agency



Payment summariesPayment summaries

• Payment summaries (formerly group certificates)

• Must be completed for each employee• Must be issued to employee by 14th day after

financial year end• Must be issued 14 days after termination if

requested by employee



Other payroll related expensesOther payroll related expenses

• Payroll tax• Superannuation Guarantee Scheme• Fringe benefits tax



Payroll processing flow chartPayroll processing flow chart



Internal control procedures for the Internal control procedures for the payroll cyclepayroll cycle• Only hire appropriately authorised persons• Pay rates must be authorised by appropriate person• Time records maintained• Segregation of duties practiced• HRD notified of terminations so names are removed immediately• Employee to sign timecard and receipt for cash wages• Pay distributed by responsible person not in payroll department• Safekeeping of unclaimed wages • Payroll registers serially numbered• Cheque signatories to check payroll register before authorising

payment



Computer application systems for Computer application systems for the payroll cyclethe payroll cycle

– Saves clerical labour– Records the information in the same categories

as a manual system– Quick production of the documentation required– Reduces clerical handling errors– Easily generates detailed reports for

management use– Prints pay advice and payment summaries– Updates employee records



Overcoming payroll irregularitiesOvercoming payroll irregularities

• Improper recruitment procedures• Noncompliance with employment laws• Unauthorised changes processed• Incorrect data is input • Inaccurate calculations

© 2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Accounting Information & Reporting Systems by A. Aseervatham and D. Anandarajah. Slides prepared by Kaye.

Documents

mcgrawhill australia

kaye watson

current payroll period

awards slide

ato slide

payroll cycle transactions

rates of pay

payroll tax rate