Payroll Management Features - Research Paper Example

Diploma of Business Administration Unit BSBFIM502A Unit Manage payroll _______________________________ Student Number: _______________________________ Assessment : FIM-1 Due date: ______________________________ Modified due date: ­­­­­­­­ ______________________________ Modified due date: ­­­­­­­­­­­­­­­­­­­­ ______________________________ Student Details: Street: ________________________________________________________ City/Town: _________________________________ Post Code: ____________ Phone: ________________________ (H) ______________________ (W) Part A-Required Knowledge 1. The purpose for establishing security procedures for payroll information management: Security of payroll records and data is important to ensure confidentiality. The payroll management and processing staff must provide priority to the security of payroll data and records Internal (Revenue Service 2009). Payrolls contain employer and employee data, records and information. Confidentiality of employee payroll records and data is significant because a leak may result in conflict among employees and compromise the financial situation of the employer or employee. Failure to secure the payroll records and data can pilot identify theft, public relations problems and government fines. 2. How substantiation procedures guarantee that an employee’s claim for an allowance is substantiated: Employees must provide substantiated information and records to claim their allowances. The key principle fundamental expense substantiation is that to subtract work expenses; the employee needs to substantiate them by acquiring written proof of the expense. The records of written proof or substance provide evidence of spent finances. They provide prove that the expense was incurred and required reimbursement. The substantiation procedures ensure that the employee provides documentation for the expenses incurred to ensure proper auditing and limit frauds (Revenue Service 2009). 3. Records related to payroll management: Every organization must keep employee payroll information to include records and data. The payroll records include the employee name and address, social security number, pay rates; total wages earned, deductions and net pay, bank account details and employee benefits like health insurance premiums and retirement contributions. The payroll management must keep these data and records for duration of three years before making any alterations unless otherwise stated or at the request of the employee (Revenue Service 2009). 4. Key Items that required calculating an employee’s gross pay: Gross pay of an employee is the total amount of money paid before taxes or before other deductions is subtracted from the total remuneration. The gross pay includes basic remuneration, allowances, compensation for services including overtime pay, bonuses, commissions and any other amounts deemed payable by the employer that are found in the personnel appointment data. In addition, the gross pay includes interests, rents, royalties, alimony, annuities and pensions found in the bank statements of the employee (Revenue Service 2009). 5. Statutory deductions that can apply to a wage or salary earner: Every employee is entitled to certain statutory deductions from his or her salary. Among the accepted statutory deductions includes pay as you earn (PAYE) and students loans. A pay is the withholding tax on the amount of income of the employee. The government has a provision of deducting PAYE from an employee’s salary. The deduction is calculated annually with a government directed percentage basing on the range of salary of the employee. Student loans are the loans that an employee took out exclusively to pay for expenses of qualified higher education. The tax authority provides a criterion of deducting student loans from an employee’s income. The criterion provides an acceptable deductible percentage from the gross pay. There is provided an acceptable amount of gross income that can warrant student loan deductions (Revenue Service 2009). 6. My Job description and Two allowable Tax deductions to reduce my income tax: I work as an assistant accountant in a flower firm. My job description includes maintaining employee payrolls, maintaining debtors and creditors accounts, royalties and tax benefits, filing and ensuring proper maintenance of employee financial data and records. As an assistant accountant, I am entitled to a taxable basic salary in addition to my other earnings. I am entitled to in-patient medical and dental cover and expenses and job expenses tax deductions among others. My medical cover entitlement deductions amount to expenses as provided by the medical attendant or hospital. The expenses are deductible as provided by my employer in the employment contract (Revenue Service 2009). Some of the items I am allowed to include in my job expenses deductions threshold include journal subscriptions and professional memberships. I am also allowed to include expenses of tax-preparation software programs and any other expense paid for a professional tax preparation in my deductions. As a trainee, my employer encourages me to source and read accounting and finance journals and will be responsible for their costs hence they are deducted from my pay. My employer also encourages me join professional finance and accounting bodies chargeable to my company hence making the expenses deductible from my gross pay (Revenue Service 2009). 7. Key time lines that an organization must consider before a new employee begins work: After a successful interview, the interviewee is given a letter of appointment and a contract letter to as proof for employment. The new employee must be anxious about beginning his or her new job. Before commencing fulltime work, there are certain procedural items that the employee must undergo within the organization. The organization must provide an introduction time where another new employee gets to know older employees. The employer must provide a training duration for the first few months of work for the employee. In addition, the employer must give the employee ample orientation time. During the orientation, the employee learns all aspects of the organization and his or her job description. The organization must also consider the daily and weekly work routine of the employee. In addition to all these, there must be an evaluation duration in the planned timeline to assess the potentiality of the employee (Revenue Service 2009). 8. Explain three checks that an organization can perform when reconciling payroll: The Company’s payroll sequence affects many facets of its financial accounting. In addition to worker compensation, an organizations payroll expenses also influence its unemployment insurance taxes, employment tax obligations and compensation rates of workers. Through payroll reconciliation, the organization can verify that its employees have been correctly paid and that the expenses are applied to the proper accounts. Reconciliation also ensures taxes have been paid and reported precisely. It is there important to reconcile the payroll after completion of a payment cycle to guarantee the precision of the companys financial statements. To verify the accuracy of payroll, the organization must periodically print and verify all charges to the payroll master file. In addition, the organization can assign different employees to different parts of the payroll data to ensure checks and balances. Moreover, the organization must confirm that salary owed to each employee equal the pay period calculations, supported by the rate of pay of the employee and hours of work during the pay period. It is also important to review salary rates of employees periodically (Revenue Service 2009). 9. The purpose of the Tax File Number (TFN) declaration and Time lines for completion: A TFN declaration is the document that an organization uses before it starts receiving payments from a new payer. A new payer can be an employer or a government department like the Department of Human Services. The purpose of the information that an organization provides on the TFN declaration is to help in determining the total tax to be withheld from payments made to the employee or organization. For instance, it is important to complete a Tax File Number declaration document when an employee commences work for the first time, changes to a new employer or receives super benefits among others. The employee must ensure to complete the form and remit it to the employer at the aforementioned periods or the employer will withhold the top rate tax level in addition with the medical levy from all payments made to the employee, unless an exemption is stated (Revenue Service 2009). According to the Australia Tax Office, tax returns are prepared according to the financial year. The Australian financial year begins 1st June and ends 30th June of the following year. After 30th June, every individual and organization is given a period of four months to lodge their tax returns. Therefore, tax return lodging is due 31st of October every year. If an employee cannot lodge his tax return by 31 October, or by his employer’s lodgment date, he can ask the Tax office for an extension because it is not advisable to lodge incomplete tax return. 10. A. What is a payroll tax and when does a business need to register? The payroll tax is a State tax that is calculated on wages or salaries paid or payable by an organization or employer to its employees that apply in all Territories and States of Australia. It is a government requisite for Business Organizations or employers to self-assess their payroll liability on a monthly basis and perform payroll annual reconciliation at the completion of the financial year precisely by 21 July. Business in Australian must register for payroll tax if during any month their total wages exceed the normal relevant monthly subtraction threshold level (Revenue Service 2009). B). what is the current payroll tax exemption yearly threshold? In Australia, according to Australian Taxation Office (2014), “the current exemption threshold is $1.1 million in annual Australian wages. If the business’ annual Australian wages are less than $1.1 million, it does not have to pay payroll tax. If the business is a member of a group of employers, the $1.1 million threshold is calculated on the members combined annual Australian wages.” C). what is the current payroll tax rate? In Australian or Queensland, the current payroll tax rate is 4.75%. D). How often does a business have to lodge a return for payroll tax? Whether a business is in a group or not part of a group, the Queensland government office of State Revenue provides different ways of lodging payroll tax returns. The classifications include periodic returns, annual returns and final returns. The business must lodge monthly periodic returns until "seven days after the end date of the return period" (Australian Taxation Office, 2014). Even if the business does not have to pay any tax, it must lodge a return record stating zero payment. The annual returns provide a breakdown of the previous year’s wages and provide information to calculate the business’ liability for the year. The business must lodge an annual tax return by the end of the financial year, precisely 21st July each year for the past financial year. If a business registers for payroll tax, and happen to undergo a change in status in the course of a financial year, the business must lodge a final return with the office of state revenue within 21 days to help in finalizing its payroll tax before the due date of annual return (Australian Taxation Office 2014). E). When is the return due after the end of the return period? The Queensland office of state revenue states that periodic returns are due seven days after the return date while annual returns are due 21 days after the due date of promotion. The office also provides that final taxes must be returned 21days before the date of annual tax returns (Australian Taxation Office 2014). F). Example of the payroll tax for business with a total payroll of $1Million The business is a non-group member with a monthly tax lodgment frequency. It has a total payroll of $1million. The current Queensland payroll tax rate is 4.75%. The periodic liability is $47500. However, there is no annual or final tax lodging because $1million is non-taxable (Australian Taxation office 2014). Part B-Applied Knowledge 1. Security procedures and control measures for payroll Management According to Australian Taxation office (2014), the key to secure, competent and efficient payroll management is sound internal control measures. The school in Sydney could implement either of the following security and control measures to prevent such an unfortunate epic. (1) Changing authorization: it is important to only allow a change to an employee’s record like marital status, withholding deductions or allowances if the worker has submitted a request that is written and signed for the school to do so. By doing so, there is proof of request for change. (2) Auditing of employee records: it is significant to have either external or internal auditors conduct a periodic audit and assessment of the payroll function to confirm accuracy and correctness of payroll payments, if employees underpayment are still working for the school and proper accumulation of employee time records. (3) Change tracking log: when processing payroll in-house with a computerized or electronic payroll module it is essential to trigger the change tracking-log and to ensure that payroll access only available with a password-protected interface. The log helps to track all changes that are made to the payroll system that is very significant for tracking down fraudulent or erroneous entries. (4) Separation of duties: the schools can one employee prepare the payroll, and another authorize it yet another create the payments. That way the process can help in decreasing the risk of fraud in the department unless there is a collusion of multiple people in the fraud. In the case of few employees for proper separation of duties, the management should ensure that someone has reviewed and authorized the payroll before any payments are made to employees. (5) Restriction of access to records: it is important to lock up employee payroll records and files every time when they are not in use. This will help to prevent unauthorized access. If the records are stored online, the use of password protection is important. This precaution prevents both unauthorized access and unauthorized changes to records. (6) Updating signature authorization is also a way of ensuring security of payroll databases. 2. Example of a Tax invoice for Brett for the purchase of an Electric drill 3. Correction of Brett’s Logbook Errors TRAVELL CLAIM Registration number IDX 812 Car Model Volkswagen Car Model Transporter Date trip commenced Date trip ended Odometer at start Odometer at finish Business km Purpose of trip Name of driver Signature 18/6/12 18/6/12 33,345 33,375 25 Framing Brett Brett 19/6/12 19/6/12 33,412 33,442 30 Erecting Roof Brett Brett 20/6/12 20/6/12 33,501 33,585 64 Cupboards Brett Brett 21/6/12 21/6/12 33,610 33,669 59 Cupboards Brett Brett 22/6/12 22/6/12 33,680 33,725 45 Office Repairs Brett Brett Part C- Demonstrated Understanding 1. Payroll Officer Demonstration of skills: Policies and procedures for managing payroll i. Security policy: to ensure the security and confidentiality of payroll information Leaks of payroll information can lead to conflicts within the organization. Payroll confidentiality and security is important for management of employee data. Shop 5 has put this policy to ensure that only authorized personnel have access to employees’ payroll information and records. Shop 5 has put in place the following three procedures to ensure security and confidentiality of payroll information. (1) The access of the payroll data, records and information is entitled to only authorized personnel. (2) The authorization and access passwords are confidential only to the respective authorized officers. (3) The payroll must be written and counter checked by the payroll officer(s) as prescribed in the rules their department (Australian Taxation office 2014). ii. Substantiation of claims for allowances: to ensure proper accounting for all expenses Every employee must produce a written evidence of expenditure to prove financial claims. Shop 5 has valued its employees and respects their activities to ensure success of the business. In this regard, it is our responsibility to ensure proper payment of each employee’s ‘adjusted gross income.’ However, for our accountability plans each employee must provide documentation for substantiation of claims for allowances. The procedures for substantiation include; (1) employees must provide bus and parking tickets or logbook details including distance and fuel used during travels. (2) Incase treatments, employees, must provide health discharge documents, payment receipts and doctor’s note with official stamps to provide proof for treatment. (3) For Taylor uniforms, the employee must provide the address, contacts, street and pricing of the tailoring shop. iii. Financial control measures: to safeguard the organizations financial resources Safeguarding the financial resources of our shop is a significant function of all our employees in accordance with organizational and legislative requirements. It is, therefore, important to safeguard our finances from fraud or corruption and reduce every final loss that our shop may incur. The shop also ensures that all employees’ finances are legitimately earned and paid within the organization. To ensure such safety and control measures, the organization will implement the following procedures. (1) Payroll calculations must be verified with more than one payroll officer including employee hours worked, tax deductions, pay rates used and all withholdings. (2) The payroll officers must match the payroll register to supporting documents to help in backtracking in case of any malpractice. (3) The officers must ensure approval of pay changes before any changes are made to reduce collusion risks of changing pay rates (Australian Taxation office 2014). IV. Payroll checking and Authorization for Payments The payroll officers are responsible for checking payrolls and their authorization of payment of salaries and wages of employees. As the people entities to employees’ remuneration, it is important to make sure that only the authorized personnel check and verify employee payments. The business management must lie with the payroll officers for authorization of salaries and wages of employees. To ensure smooth payments and secure finances the business will ensure that (1) all employees have differentiated databases with the code name known only to the management and the payroll officer. (2) The management must verify the hours worked of employees as recorded by the payroll officer and (3) separation of duties of pay slip preparation, pay slip and payroll authorization and payments to employees. v. Reconciliations of Salaries, Wages and Deduction Payroll reconciliation helps to verify the accuracy of employee payment in an upcoming payroll. It allows the payroll officer to detect and fix errors in payroll before employees are paid. The officer also confirms appropriateness of withholding payroll taxes and their payment to the appropriate agencies to ensure that the financial statements reflect the payroll expenses. The business will ensure reconciliation of salaries, wages and deductions through the following procedure. (1) The payroll officer will print a payroll catalog with a summary each employee’s salaries, wages and deductions for a particular pay period. (2)The officers will equate the time card of each hourly-paid employee’s data with the hours exposed on the register of payroll and (3) confirm that hourly-paid employees according to their hourly pay-rates while the salaried employees were paid in accordance with their pay rates (Australian Taxation office 2014). vi. Employee enquiries related to salaries and wages It is the right of employees to know the amount of their salaries and wages. However, to the management, that information is confidential and only accessible to the management, the payroll officers and the particular employee. Thus, it is the duty of the management in liaison with the accounting department particularly the payroll section to ensure response, confidentiality and authentication of the enquiries related to salaries and wages. To realize this, the management will follow the following procedures; (1) only the management will be answerable to such enquiries unless they require experience of the payroll officer. (2) Only authorized persons are allowed to enquire about employee remuneration such as the auditor or the employee himself and (3) upon generation of any employee payroll with mistakes, the generation officer must give space for another officer to countercheck and correct the error. 2. Managing Weekly payments i. Employee Gross Calculations Mrs. Janice Wright Days in charge: Mon/Tue/Wed/Fri/Sat: Hours: 9:00am – 17:30pm Sat 11:00am – 17:30pm Total Hours- 40 hrs 30 minutes, Total normal day hrs-33hrs & Total Evening Hrs-7hrs 30minutes Hourly Payment: Weekdays-$20.18, Sat-$25.23, Evening-$22.20 & Late work-$23.21 Gross Pay Mon/Tue/Wed/Fri-$698.24 Gross pay Sat-$100.92 Payslip Monday 9th July – Sunday 15th July 2012 Total Gross Pay-$796.16 Mr. John Ryan- General Manager Employee Status: full-time and Manager in-charge of all employees Days Incharge: Wed/Thur/Fir/Sat/Sun Wed/Fri 9:00am – 17:30pm, Thu 9:00am – 21:00pm, Sat 9:00am – 17:30pm & Sun 10:30am – 16:00pm Total Hours- 46 hrs; Weekdays- 31 hrs, Weekend- 15hrs Evening weekdays-4 hrs 30mns, Sat-1 hrs-30 mins & Latework-Thur-3hrs 30 mins Hourly Payment: Weekdays-$20.18, Sat- $25.23 & Sun-$30.27, Evining-$22.20 & Late work-$23.21 Gross pay Wed/Thur/Fri- $654.37; Gross pay Sat-$227.07 & Gross pay Sun- $151.35 Total Gross pay-$1032.79 Miss. Rebecca Wong Employee Status: Casual Attendant Number of Days In-charge: Thu 9:00am – 16:00pm & Sat 11:00am – 15:00pm Gross pay: $259.36 Mr. Robert Johns Employee Status: Casual Attendant Days in-Charge: Mon/Tue 9:00am – 17:30pm, Sat 9:00am – 17:30pm & Sun 11:00am – 14:00pm Gross pay-$681.10 Miss. Mary Jacobs Employee Status: Casual Attendant Days Incharge: Wed/Fri 9:00am – 17:30pm, Thu 16:00pm – 21:00pm, Sat 9:00am – 14:00pm & Sun 10:30am – 16:00pm Gross pay- $732.60 ii. Tax calculations The current weekly tax tables (NAT1005) provide the following information for the employees Mrs. Janice Wright earns -$796.16 and 32 cents for each dollar earning gives a tax of $51 Mr. John Ryan earns -$1032.79 will pay a $51 tax Miss. Rebecca Wong Gross pay: $259.36 is non-taxable Mr. Robert Johns gross pay-$681.10 will pay a $51 tax Miss. Mary Jacobs gross pay- $732.60 and will pay a $51 tax Mrs. Janice Wright’s Pay slip Payslip Monday 9th July – Sunday 15th July 2012 Employee status: Full time supervisor TFN: 456 789 101 DOB: 2/3/1970 Days in charge: Mon/Tue/Wed/Fri/Sat: Hours: 9:00am – 17:30pm Sat 11:00am – 17:30pm Total Hours- 40 hrs 30 minutes Total normal day hrs-33hrs Total Evening Hrs-7hrs 30minutes Hourly Payment: Standard -$20.18 Sat-$25.23 Evening-$22.20 Late work-$23.21 Gross Pay Mon/Tue/Wed/Fri-$698.24 Gross pay Sat-$100.92 Total Gross Pay-$997.29 Tax – ($51) Net pay- $745.16 TFN declaration form for a new employee • TFN: 100 489 128 • Name: Ms Jennifer Brown • DOB: 5/6/1988 • Address: 10 James St, Burleigh Q 4220 • Employment status: Casual • Residence Austaralia • Employer’s ABN 12 345 678 910 • Employer’s Business Name ABC Fast Foods • Employers Business Adress Shop 5, Australia Fair Shopping Centre, 42 Marine Parade, Southport Qld 4215. • Employer’s Name and Contacts Mr. John Rayn Declaration: I Mr. John Rayn declare that the information I have provided here is true and correct : Date: 23/10/2014 Employee Summary (Group Certificate) for the previous financial year for Mrs Janice Wright (employee #1) ABC Fast Foods Pty Ltd pay advice slip Employers ABN: 12 345 678 910 Employee no: 456 789 101 Date of payment: Monday 15th July 2012 Pay period ending: Monday 15th July 2012 Employee’s name: Mrs Janice Wright Employment status: Full Time Supervisor Wages, allowances and overtime Hours Rate Amount Wages Standard hours 8 $20.18 $698.24 Wages Overtime rate 1 6 $22.20 $133.20 Wages Overtime rate 2 6.30 25.23 $168.85 Payment summary This pay: Year to date: Wages $698.24 Monday 15th July 2012 Allowances $302.05 Monday 15th July 2012 Gross pay $997.29 Monday 15th July 2012 PAYG tax $997.29 Monday 15th July 2012 Deductions $51 Monday 15th July 2012 Net pay $946.29 Monday 15th July 2012 References Australian Taxation office (2014) https://www.ato.gov.au/ Internal Revenue Service. (2009). Internal Revenue Service Cumulative Bulletin: 2007-2. Internal Revenue Service. Read More