7. Introduction to Payroll Administration The main function of payroll is essentially to pay employees for work done. This however covers several activities ranging from calculating tax and paying it to SARS through to paying employees for expenses incurred or leave taken. What your payroll involves and the specific functions you will be required to perform will depend upon the size of the company and any payroll policies and procedures which are in place. Often companies with a large workforce and a complicated remuneration system will have a payroll department and employ a number of staff to process the pay. Smaller organisations will not have the same requirements and may employ one person to do a range of functions, one of which is processing the pay. The Human Resources (HR) and the Payroll Administration Departments are inter-related and operate in close contact. The HR Department formulates the personnel policies and manpower planning, whereas the Payroll Department will see to the implementation and maintenance of the payroll and related functions. Payroll Function The functions of a payroll administrator can be summarized as follows: • To do the necessary input on the payroll system to ensure that an employee receives a payslip at the end of each pay period • To ensure that the cash reflected as the net pay on the payslip is transferred to the employee • To provide management with reports reflecting payroll information • To complete statutory returns on a monthly and annual basis • To ensure that all payments to third parties and statutory bodies are made • To reconcile the payroll by balancing payslips to input documents • To fulfil bookkeeping responsibilities by entering payroll information in the cash book or general ledger. • Where the matters do not fall within the discretion of the payroll administrator, it must be referred to the appropriate person (e.g. payroll manager, financial manager, HR manager) • Ensure that all contractual entitlements and payment methods are checked for proper authorisation and for consistency with the organisation’s pay policies and statutory regulations. Payroll Systems The payroll process has evolved from manual wage books to sophisticated computer-based systems which perform many of the calculations necessary in the administration of payroll. Manual systems are exactly as the name describes a manual system of calculating employee pay. Manual systems are very time consuming and require an enormous amount of cross checking and reconciliation. Due to the time-consuming nature of a manual payroll system they are only suitable for employers with uncomplicated payroll requirements. Computerised payrolls are becoming the preferred payroll system and unlike manual payrolls, the computer software associated with the payroll performs most of the calculations and usually cross check and reconciles the payroll. The automatic nature of computerised systems makes it very time efficient. Confidentiality Confidentiality is specifically addressed in the Basic Conditions of Employment Act which refers to “preservation of secrecy” stating that you may not disclose any information, which you have obtained in the course of your duties, concerning the financial affairs of any other person, except: • If it is necessary for the proper administration of the Act, • To any legal proceedings relating to a matter under the Act, • To the Wage Board, the Board of Trade, and Industries, or an Industrial or Labour Court. • As a payroll administrator, you will for example, be contacted by stores who want to check an employee’s credit references. • If the store wants to know what the employee’s earnings are, ask what amount he/she gave them and confirm it. Do not give the amount yourself. As a payroll administrator, you will for example, be contacted by stores who want to check an employee’s credit references. If the store wants to know what the employee’s earnings are, ask what amount he/she gave them and confirm it. Do not give the amount yourself. A payroll administrator should always keep the principle of confidentiality in mind. You should regard all information as confidential. Even particulars like an employee’s marital status and age should be treated as confidential. More guidelines: • Do not print payslips or other reports on a printer to which everyone has access. This is especially important if your payroll is installed on a network where you may print to different printers. • Do not leave payslips, reports or any other confidential information lying in your office when you leave the office. The office door should preferably, be locked when you leave. • Do not give any unnecessary particulars concerning employees or the company to people over the phone. • It is recommended that the payroll administrator is in an office of his/her own or that there is at least a lockable filing cabinet for filing confidential information. • The layout of the office is extremely important. If your payroll is processed electronically, the screen must be positioned in such a way that people entering the office will not be able to see confidential information on the screen. • Payrolls that are processed electronically must be restricted by passwords. Laws of Payroll: South Africa 1. The company needs to be registered for deductions When you set up a company in South Africa, make sure that you are registered for: • PAYE (the tax deducted from your employees) • the skills development levy (SDL) you deduct to pay over to the sectoral education training authority • Unemployment insurance fund (UIF) As a company you will also need to be registered for company tax as well as VAT. 2. There are certain requirements set by bargaining councils Depending on the industry you are in, you may be governed by a bargaining council agreement that will dictate minimum wages to your employees. An example would be the retail bargaining council, or you may be in an industry that has no minimum wage. The bargaining council will also dictate hours of work, overtime rates and every aspect of the employment relationship. Failure to comply does result in a warning and sometimes a hefty fine. 3. You must have a contract of employment for every employee According to the basic conditions of the employment act, each employee must have a written employment contract provided by the company. The contract must contain certain conditions of employment as stipulated in the act. This includes notice period, annual leave, pay rates etc. Inspectors from the department of labour regularly check on adherence to these requirements. 4. The differences in classifying workers as employees In South Africa you are considered an employee and you are protected by the employment laws if you work more than 24 hours per month. If you work less than 24 hours per month or if you are a member of the National Defence Force, National Intelligence Agency, South African Secret Service or an unpaid volunteer working for an organisation with a charitable purpose, you are not covered by the Basic Conditions of Employment Act. Beware that there are situations where the temporary worker can be covered and has the same rights as those of a permanent worker. 5. Leave pay is calculated at a different rate than normal pay When calculating normal pay you multiply the hourly rate by the number of hours worked. When calculating holiday pay, the hourly rate is calculated as an average rate taken over the last three months, and this must also include overtime and any commission received by the employee. 6. You must submit all employee information monthly before the deadline On the seventh day of each month, you must submit your tax, unemployment and skills development return (EMP 201) to the receiver of revenue and pay the amounts due. If there are any late submissions, you will be liable for a fine of 10 per cent of the total amount outstanding. No exceptions are allowed on this deadline. There are also submissions in August for the six-month reconciliation, as well as the annual reconciliation in April/May. Workmen’s compensation returns are due in March. There is also a monthly return to be done to the Department of Labour. These all refer to earnings and deductions done on your payroll. 7. All records must be saved and made accessible by employers All employee records need to be kept for a period of five years. This is the responsibility of the employer. The documents that need to be kept include time sheets, payslips and contracts of employment. Electronic copies are acceptable. It is recommended that any documents to do with the receiver of revenue be kept indefinitely. 8. Employment equity is a serious matter This is a very real issue and the reporting and implementation is taken very seriously. Large companies need to submit a report every six months to the Department of Labour detailing their progress on their employment equity planning and status. Smaller companies need to submit these reports annually. 9. The banking system available The South African banking systems are sophisticated and on par with international electronic transfer standards. All monies can be transferred to individual employees or across to third party creditors such as pension or medical insurance companies. These transfers are done via the main banks or via third party suppliers. The timing of transfers is such that if you complete it by 3pm, the money will be available to employees by 12pm midnight. 10.There are seven laws that govern the employment and remuneration relationship South African workers are well educated on what they are entitled to and expect the payroll department and the company to deliver what is due. Therefore, it is imperative to run an error-free payroll. The following seven acts regulate the employment relationship in South Africa: • Basic Conditions of EA • Labour Relations Act • Unemployment Insurance Act • Health and Safety Act • Workman’s Compensation Act • Income Tax Act • Skills Development Act 8. Learning Unit 1 US:110024 , NQF Level 34 Worth 10 Credits PLAN, ORGANISE, IMPLEMENT AND MONITOR WORK WITHIN THE PAYROLL ENVIRONMENT Unit Standard Purpose This unit standard is for learners in the payroll profession, or those seeking to enter the payroll profession, who wish to enhance their payroll competencies. Learners who are competent in this unit standard will be able to plan and, where necessary, agree on work methods and/or activities to achieve work objectives, to coordinate his/her own work with that of colleagues in achieving planned work outcomes and to monitor and control planned work, taking corrective action where necessary. The qualifying learner is capable of: • Planning work for payroll cycle. • Monitoring and controlling the achievement of targets planned within the payroll cycle. • Developing procedures to meet specified needs. • Implementing and maintaining procedures. • Managing appointments. Learning Assumed to be in Place It is assumed that the learner has the following knowledge and skills: • Communication at NQF Level 3. • Mathematical Literacy at NQF Level 3. • The Unit Standard “Demonstrate an understanding of statutory legislation and requirements relating to payroll administration” at NQF Level 4. Session 1 SO 1 Plan work for payroll cycle. Learning Outcomes (Assessment Criteria) • Tasks are identified and prioritised to meet organisational statutory and requirements. • Resources are allocated to complete identified tasks in order of priority. • Changes in priorities are recognised and resource allocations adapted accordingly. • Relevant assistance is identified, negotiated and coordinated to meet specific demands and deadlines. • Tasks are accurately defined, and appropriate information provided. • Work methods and activities are clearly defined and agreed with appropriate persons. • Work methods and activities conform to statutory requirements and organisational procedures. a. Understanding the Payroll Cycle The most common payroll frequencies are daily, weekly, fortnightly or monthly. Payroll frequencies are determined by the Basic Conditions of Employment / Applicable Bargaining Council Main Agreements or Company Policies. Important things to understand before a Payroll (Cycle or Process) can be established: • BCEA / Bargaining Council Legislation Obligations • Statutory Requirements / Obligations • Environment • Financial Reporting Dates and Requirements • How Data Is Transmitted • Legislation Changes • Off-Cycle Adjustments • Pay Days • Leave Entitlements • Query Process • Responsible Departments • Review and Approval Process • Variables Full Cycle Payroll processing consists of the steps needed to pay employees each period. The life cycle of payroll processing is usually between 1 – 12 days. Payroll processing involves processing employee remuneration [Basic Salary, Wages, Overtime, Gratuities, Allowances etc.], processing deductions and contributions [Statutory PAYE, UIF, Union fees and any Bargaining Council elements and non-statutory deductions as governed by Company Policies, Pension / Provident Fund Contributions, Medical Aid, Fines, Tools etc] The payroll cycle is a process that you complete each time that you pay employees. The payroll cycle consists of these basic steps: • Process Company and Legislation Changes. • Process Employee Changes. • Process Employee Income / Deduction / Contributions. • Process Variables. • Send For Integrity Check. • Send For Accuracy Check. • Process Corrections. • Send For Final Check. • Send For Approval. • Send For Payment. • Process Journal Entries. • Print Payroll Cycle Reports. • Close. Before each payroll cycle, you enter and update information that the system uses during the payroll cycle. This information includes pay frequency and employee information, such as the Employee’s Tax Number, ID Number, Pay Rate, Variable Income, Variable Deductions etc. This diagram shows the standard flow of events (the payroll cycle) that you use to process payroll for employees. The top line shows the flow of the tasks that you perform before and after a payroll cycle. The circle represents an example payroll cycle: It is imperative that you review Company Information and possible Legislative Changes before starting with your Payroll as some Payroll Systems require authorisation to apply legislative updates or require recalculations to be done before proceeding with the next Payroll Period. b. Identifying and Planning for a Payroll Cycle The importance of Planning can be defined by the 5 P’s – Prior Planning Prevents Poor Performance Take the following into consideration when planning: • Closing Reports Due Date • Quantity Of Variable Input • Statutory Deadlines • Time Required to Approve Payroll Data • Time Required to Capture Payroll Data • Time Required to Review and Correct Payroll Data • When Is Funding and Bank Files Due? Is This Sufficient Time for Funds to Reflect? • When Is the Pay Date? Does This Fall Over a Weekend or Public Holiday? The Payroll Cycle within each organisation may vary depending on the company structure, available resources, review, approval processes and pay methods. Example: Action Responsible Person Process Company and Legislation Changes. Payroll Administrator or Payroll Manager Process Employee Changes. HR Administrator or Payroll Administrator Process Employee Income / Deduction / Contributions. Payroll Administrator

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7. Introduction to Payroll Administration The main function of payroll is essentially to pay employees for work done. This however covers several activities ranging from calculating tax and paying it to SARS through to paying employees for expenses incurred or leave taken. What your payroll involves and the specific functions you will be required to perform will depend upon the size of the company and any payroll policies and procedures which are in place. Often companies with a large workforce and a complicated remuneration system will have a payroll department and employ a number of staff to process the pay. Smaller organisations will not have the same requirements and may employ one person to do a range of functions, one of which is processing the pay. The Human Resources (HR) and the Payroll Administration Departments are inter-related and operate in close contact. The HR Department formulates the personnel policies and manpower planning, whereas the Payroll Department will see to the implementation and maintenance of the payroll and related functions. Payroll Function The functions of a payroll administrator can be summarized as follows: • To do the necessary input on the payroll system to ensure that an employee receives a payslip at the end of each pay period • To ensure that the cash reflected as the net pay on the payslip is transferred to the employee • To provide management with reports reflecting payroll information • To complete statutory returns on a monthly and annual basis • To ensure that all payments to third parties and statutory bodies are made • To reconcile the payroll by balancing payslips to input documents • To fulfil bookkeeping responsibilities by entering payroll information in the cash book or general ledger. • Where the matters do not fall within the discretion of the payroll administrator, it must be referred to the appropriate person (e.g. payroll manager, financial manager, HR manager) • Ensure that all contractual entitlements and payment methods are checked for proper authorisation and for consistency with the organisation’s pay policies and statutory regulations. Payroll Systems The payroll process has evolved from manual wage books to sophisticated computer-based systems which perform many of the calculations necessary in the administration of payroll. Manual systems are exactly as the name describes a manual system of calculating employee pay. Manual systems are very time consuming and require an enormous amount of cross checking and reconciliation. Due to the time-consuming nature of a manual payroll system they are only suitable for employers with uncomplicated payroll requirements. Computerised payrolls are becoming the preferred payroll system and unlike manual payrolls, the computer software associated with the payroll performs most of the calculations and usually cross check and reconciles the payroll. The automatic nature of computerised systems makes it very time efficient. Confidentiality Confidentiality is specifically addressed in the Basic Conditions of Employment Act which refers to “preservation of secrecy” stating that you may not disclose any information, which you have obtained in the course of your duties, concerning the financial affairs of any other person, except: • If it is necessary for the proper administration of the Act, • To any legal proceedings relating to a matter under the Act, • To the Wage Board, the Board of Trade, and Industries, or an Industrial or Labour Court. • As a payroll administrator, you will for example, be contacted by stores who want to check an employee’s credit references. • If the store wants to know what the employee’s earnings are, ask what amount he/she gave them and confirm it. Do not give the amount yourself. As a payroll administrator, you will for example, be contacted by stores who want to check an employee’s credit references. If the store wants to know what the employee’s earnings are, ask what amount he/she gave them and confirm it. Do not give the amount yourself. A payroll administrator should always keep the principle of confidentiality in mind. You should regard all information as confidential. Even particulars like an employee’s marital status and age should be treated as confidential. More guidelines: • Do not print payslips or other reports on a printer to which everyone has access. This is especially important if your payroll is installed on a network where you may print to different printers. • Do not leave payslips, reports or any other confidential information lying in your office when you leave the office. The office door should preferably, be locked when you leave. • Do not give any unnecessary particulars concerning employees or the company to people over the phone. • It is recommended that the payroll administrator is in an office of his/her own or that there is at least a lockable filing cabinet for filing confidential information. • The layout of the office is extremely important. If your payroll is processed electronically, the screen must be positioned in such a way that people entering the office will not be able to see confidential information on the screen. • Payrolls that are processed electronically must be restricted by passwords. Laws of Payroll: South Africa 1. The company needs to be registered for deductions When you set up a company in South Africa, make sure that you are registered for: • PAYE (the tax deducted from your employees) • the skills development levy (SDL) you deduct to pay over to the sectoral education training authority • Unemployment insurance fund (UIF) As a company you will also need to be registered for company tax as well as VAT. 2. There are certain requirements set by bargaining councils Depending on the industry you are in, you may be governed by a bargaining council agreement that will dictate minimum wages to your employees. An example would be the retail bargaining council, or you may be in an industry that has no minimum wage. The bargaining council will also dictate hours of work, overtime rates and every aspect of the employment relationship. Failure to comply does result in a warning and sometimes a hefty fine. 3. You must have a contract of employment for every employee According to the basic conditions of the employment act, each employee must have a written employment contract provided by the company. The contract must contain certain conditions of employment as stipulated in the act. This includes notice period, annual leave, pay rates etc. Inspectors from the department of labour regularly check on adherence to these requirements. 4. The differences in classifying workers as employees In South Africa you are considered an employee and you are protected by the employment laws if you work more than 24 hours per month. If you work less than 24 hours per month or if you are a member of the National Defence Force, National Intelligence Agency, South African Secret Service or an unpaid volunteer working for an organisation with a charitable purpose, you are not covered by the Basic Conditions of Employment Act. Beware that there are situations where the temporary worker can be covered and has the same rights as those of a permanent worker. 5. Leave pay is calculated at a different rate than normal pay When calculating normal pay you multiply the hourly rate by the number of hours worked. When calculating holiday pay, the hourly rate is calculated as an average rate taken over the last three months, and this must also include overtime and any commission received by the employee. 6. You must submit all employee information monthly before the deadline On the seventh day of each month, you must submit your tax, unemployment and skills development return (EMP 201) to the receiver of revenue and pay the amounts due. If there are any late submissions, you will be liable for a fine of 10 per cent of the total amount outstanding. No exceptions are allowed on this deadline. There are also submissions in August for the six-month reconciliation, as well as the annual reconciliation in April/May. Workmen’s compensation returns are due in March. There is also a monthly return to be done to the Department of Labour. These all refer to earnings and deductions done on your payroll. 7. All records must be saved and made accessible by employers All employee records need to be kept for a period of five years. This is the responsibility of the employer. The documents that need to be kept include time sheets, payslips and contracts of employment. Electronic copies are acceptable. It is recommended that any documents to do with the receiver of revenue be kept indefinitely. 8. Employment equity is a serious matter This is a very real issue and the reporting and implementation is taken very seriously. Large companies need to submit a report every six months to the Department of Labour detailing their progress on their employment equity planning and status. Smaller companies need to submit these reports annually. 9. The banking system available The South African banking systems are sophisticated and on par with international electronic transfer standards. All monies can be transferred to individual employees or across to third party creditors such as pension or medical insurance companies. These transfers are done via the main banks or via third party suppliers. The timing of transfers is such that if you complete it by 3pm, the money will be available to employees by 12pm midnight. 10.There are seven laws that govern the employment and remuneration relationship South African workers are well educated on what they are entitled to and expect the payroll department and the company to deliver what is due. Therefore, it is imperative to run an error-free payroll. The following seven acts regulate the employment relationship in South Africa: • Basic Conditions of EA • Labour Relations Act • Unemployment Insurance Act • Health and Safety Act • Workman’s Compensation Act • Income Tax Act • Skills Development Act 8. Learning Unit 1 US:110024 , NQF Level 34 Worth 10 Credits PLAN, ORGANISE, IMPLEMENT AND MONITOR WORK WITHIN THE PAYROLL ENVIRONMENT Unit Standard Purpose This unit standard is for learners in the payroll profession, or those seeking to enter the payroll profession, who wish to enhance their payroll competencies. Learners who are competent in this unit standard will be able to plan and, where necessary, agree on work methods and/or activities to achieve work objectives, to coordinate his/her own work with that of colleagues in achieving planned work outcomes and to monitor and control planned work, taking corrective action where necessary. The qualifying learner is capable of: • Planning work for payroll cycle. • Monitoring and controlling the achievement of targets planned within the payroll cycle. • Developing procedures to meet specified needs. • Implementing and maintaining procedures. • Managing appointments. Learning Assumed to be in Place It is assumed that the learner has the following knowledge and skills: • Communication at NQF Level 3. • Mathematical Literacy at NQF Level 3. • The Unit Standard “Demonstrate an understanding of statutory legislation and requirements relating to payroll administration” at NQF Level 4. Session 1 SO 1 Plan work for payroll cycle. Learning Outcomes (Assessment Criteria) • Tasks are identified and prioritised to meet organisational statutory and requirements. • Resources are allocated to complete identified tasks in order of priority. • Changes in priorities are recognised and resource allocations adapted accordingly. • Relevant assistance is identified, negotiated and coordinated to meet specific demands and deadlines. • Tasks are accurately defined, and appropriate information provided. • Work methods and activities are clearly defined and agreed with appropriate persons. • Work methods and activities conform to statutory requirements and organisational procedures. a. Understanding the Payroll Cycle The most common payroll frequencies are daily, weekly, fortnightly or monthly. Payroll frequencies are determined by the Basic Conditions of Employment / Applicable Bargaining Council Main Agreements or Company Policies. Important things to understand before a Payroll (Cycle or Process) can be established: • BCEA / Bargaining Council Legislation Obligations • Statutory Requirements / Obligations • Environment • Financial Reporting Dates and Requirements • How Data Is Transmitted • Legislation Changes • Off-Cycle Adjustments • Pay Days • Leave Entitlements • Query Process • Responsible Departments • Review and Approval Process • Variables Full Cycle Payroll processing consists of the steps needed to pay employees each period. The life cycle of payroll processing is usually between 1 – 12 days. Payroll processing involves processing employee remuneration [Basic Salary, Wages, Overtime, Gratuities, Allowances etc.], processing deductions and contributions [Statutory PAYE, UIF, Union fees and any Bargaining Council elements and non-statutory deductions as governed by Company Policies, Pension / Provident Fund Contributions, Medical Aid, Fines, Tools etc] The payroll cycle is a process that you complete each time that you pay employees. The payroll cycle consists of these basic steps: • Process Company and Legislation Changes. • Process Employee Changes. • Process Employee Income / Deduction / Contributions. • Process Variables. • Send For Integrity Check. • Send For Accuracy Check. • Process Corrections. • Send For Final Check. • Send For Approval. • Send For Payment. • Process Journal Entries. • Print Payroll Cycle Reports. • Close. Before each payroll cycle, you enter and update information that the system uses during the payroll cycle. This information includes pay frequency and employee information, such as the Employee’s Tax Number, ID Number, Pay Rate, Variable Income, Variable Deductions etc. This diagram shows the standard flow of events (the payroll cycle) that you use to process payroll for employees. The top line shows the flow of the tasks that you perform before and after a payroll cycle. The circle represents an example payroll cycle: It is imperative that you review Company Information and possible Legislative Changes before starting with your Payroll as some Payroll Systems require authorisation to apply legislative updates or require recalculations to be done before proceeding with the next Payroll Period. b. Identifying and Planning for a Payroll Cycle The importance of Planning can be defined by the 5 P’s – Prior Planning Prevents Poor Performance Take the following into consideration when planning: • Closing Reports Due Date • Quantity Of Variable Input • Statutory Deadlines • Time Required to Approve Payroll Data • Time Required to Capture Payroll Data • Time Required to Review and Correct Payroll Data • When Is Funding and Bank Files Due? Is This Sufficient Time for Funds to Reflect? • When Is the Pay Date? Does This Fall Over a Weekend or Public Holiday? The Payroll Cycle within each organisation may vary depending on the company structure, available resources, review, approval processes and pay methods. Example: Action Responsible Person Process Company and Legislation Changes. Payroll Administrator or Payroll Manager Process Employee Changes. HR Administrator or Payroll Administrator Process Employee Income / Deduction / Contributions. Payroll Administrator

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