Controls are put into any payroll system to ensure that:
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only authorized personnel have access to confidential information
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only authorized personnel process authorized transactions
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employees are paid and receive the correct amounts for their labour
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Physical Controls
There are a number of physical controls that can be implemented that assist in controlling the system, amongst these are limiting access:
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on a standalone computer to the computer room or on a network to the server and workstations
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by using Windows password protection against information being accessed on the computer directly or through the network
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to data capture sheets, pay rate documentations, reports and other confidential payroll information
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Backups are secured against unauthorized access
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Care should also be taken to ensure that:
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All discarded reports and papers are shredded and destroyed
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Electronic copies of reports are be secured
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Backups are secured against unauthorized access
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Password Controls
Care should also be taken to ensure that:
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Each user of the system uses a secure password with sufficient characters, numerics and special characters so as to make it difficult to compromise
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Passwords are kept confidential and not shared
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Passwords are changed regularly
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Password parameters set to limit each User to specified menu options, tables and forms
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Password parameters set to limit ability to view certain Transaction Codes
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Data Controls
To protect against data loss or corruption ensure that:
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you backup your payrolls every period. We recommend that a history of backups is maintained. This can be done on a cloud based platform, your hard disk drive as well as on other external media.
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regularly do Backups of the database (remembering to backup all payrolls). One backup once a period has been paid, but before period end, and ideally one or more during processing during that period.
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keep updating antivirus software and virus definitions on your computer
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that there is sufficient free space on the hard disk drive for the software to work and store information.
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do a backup after processing and printing salaries on the hard drive and on any external storage device in case your machine is stolen or the hard drive crashes
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Data Capture - Batch Input/ Control Totals
The 'Batch Input' facility specifically has batch controls that prevent updating of records until the batch total entered prior to processing agrees with what has been entered. If 'Batch Input' is not being used, then it is possible to compute the total value of transactions from the source documents (control totals) and compare the totals with that detailed on the 'Period Journal - Transaction Codes' report.
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All figures on the payroll should be rigorously supported by documents of authority e.g. employment contracts, pay rate change sheets, allowance, overtime, leave and loan forms.
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The data processed should be checked against supporting documents
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Make sure that the total number of employees processed on the payroll corresponds with the number of staff employed
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Always run a calculation routine before doing your bank transfer or running reports
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Make sure that your journal is balancing off before printing any reports or finalizing your payroll
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Print reports before doing a period end, especially your payslip summary, bank transfer report, receipts schedule, coinage analysis report.
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Make sure that your total wage bill matches what you transferred to the bank or what is being printed on your receipts schedule
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Payroll Lock
It is possible to lock the system after certain functions have been performed.
Control Checks
It is important to regularly perform checks on the payroll. This keeps payroll officers alert. It also reduces the likelihood of:
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occasional error that may occur through negligence or mistake, and
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may highlight repetitive error that may be occurring
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It is especially important to select a small random sample (at least one employee) from each payroll each period for thorough checking. Agree:
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the basic to authorized pay rates,
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overtime and allowances to relative authorizations,
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authenticity and accuracy of deductions
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every detail of the the PAYE computation. Extract a 'Tax Display' and go through and agree each step of the computation
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Control checks also include:
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checking the total number of employees processed on the payroll agrees with the physical number of employees
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checking the total basic pay amount paid to employees agrees to an authorized basic pay schedule
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checking the total payroll overtime hours agrees to total hours approved
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checking the total allowances processed agrees to approval documents
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reconciling totals from one period to another e.g. basic, overtime investigating any changes
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reconciling the Period Journal Control report net paid amount to total payments made to employees by cash, cheque or transfer.
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examination of the Period Journal Variance report for reasonableness. Compare totals, number of employees and percentage variances for each transaction code.
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Reports
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Print reports before doing a period end, especially your payslips, payslip summary, bank transfer report, receipts schedule, coinage analysis report
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Make sure all reports are properly printed and tally with what is on the payroll
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Print control reports like period journal control reports, and other reports which you then can check against to see if any changes have been done
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View the 'Audit' report from time to time to check whether there are any unusual activities on the payroll. The 'Audit' report shows what was actually transacted, viewed, or processed on the payrolls including who and what a user did on the system including what payrolls were opened, what employees were worked on, what tables were opened, and what routines were run.
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View the 'Master File Changes' or security log report. This report highlights the changes made to the employee masterfiles
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The Period Control Journal Report can be printed as a useful means of seeing what transactions have been entered using the different processing methods. To view this report, Go to 'View', then 'Period Journal', then 'Control' menu options. View the report is a journal that breaks by processing method; Payslip Input, Bulk Input, Hourly Input, etc. This can assist in supervising payroll clerks.
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There are also exception reports that can highlight problematic areas. To access these reports Go to 'View' and select the 'Exceptions' menu option. This brings up options like 'Audit', 'Paye' etc
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Care should also be taken to ensure that all discarded reports and papers are shredded and destroyed.
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Electronic copies of reports are be secured
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Risk Areas
'Ghost employees'
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Limit the ability of unauthorized staff to restore a payroll backup
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Limit unauthorized staff from being able to terminate and re-engage employees
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Ensure that the net paid amount on the payroll authorized by management agrees to the actual amounts paid to employees by cash, cheque and bank transfer
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Physically check the existence of employees that are on the payroll
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Rates of Pay
Password protect the employee master pay rate field
Reconcile the total Basic Pay for a period against a schedule of authorized pay rates
Randomly check (as detailed above) the rate of pays of a sample of employees (at least one employee) each period
Overtime
Reconcile the overtime hours for each category of overtime against authorized overtime payment sheets
Randomly check (as detailed above) for each category of overtime the number of hours awarded.
Manipulation of the leave balance
Manipulation of loan balances and repayments
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