Payroll Administration: Basic Tips for Minimising Errors


Payroll administrators that makes too many mistakes in their payroll month after month will find themselves losing their jobs. It does not matter whether if the payroll administrator has a degree in Accountancy or Human Resource Management because the degree does not help.

What that are needed are good habits and an effective routine. In this article, I assume that you are the payroll administrator.

Payroll Schedule

One of the worst thing to do is to pay employees late. The 2 known dates that the payroll administrator would have are the payroll cut off and the payroll payment dates. Where these falls on non working days, public holidays or company events, the payroll administrator may have to advise functional departments or business entities to submit  their payroll information a little earlier or that submission beyond a specified date would not be accepted.

There would times when the payroll need to be processed earlier because the company authorities that authorise the release of funds or approving the finalized payroll may not be around. It is for these reasons that the payroll administrator needs to draw up a payroll schedule on annual basis. Often, unforseen or unplanned haste leads to mistakes.

Payroll Signatories and Payroll Funding

The payroll administrator needs to make sure that he or she know who are the payroll and alternative payroll signatories. Sometimes, the persons approving the payroll report may not be the official signatories for cheques. Usually, it is the Finance or Accounting Department that makes out such cheques.

If the payroll administrator have cheque payments, for example, payments to resignees or long service awards, he or she needs to inform the Finance or Accounting Department early, so that they have enough time to obtain the required signatures.

Gather All Source Documents

If practical, place all the soft copies of the source documents that you use to enter payroll data into your spreadsheet or payroll software into 1 single computer folder that is labelled by the processing period, for example, March 2017.

Use a physical plastic folder as your working folder for the processing period or month. Print out a physical copy of the source documents and put them in here. If you are receiving physical copies of source documents from other functional departments,for example time-sheets; shift duty records, transport claims, put them in the same folder. If a plastic folder is too small, use a document tray or anything that you can use as a centralised physical location to gather all the source and supporting documents.

This makes it easy for you, the payroll administrator to go through the source and supporting documents, for documents checking and data entries.

Check Incoming Source Documents for Completeness

Do not wait till the moment that you need to input your payroll data to check the source documents being handed in by the user departments or entities. Time is very precious when comes to payroll processing: You are working against the clock.You should do so as soon as you received the documents.

Organize Payroll Data Presented on Source Documents

Wherever possible, organize the payroll data for each of the personnel presented in the source documents according to the name order than they will appear in your payroll report.

This is to help the checking of the payroll report against the souce documents. Your eyes would be able to check the data inputs line by line, in an orderly fashion rather than have to search everywhere in the payroll report or the source document. The later is also very time-consuming and leads to error in checking when the payroll is being processed in a hurry.

Arrange Supporting Documents in the Correct Order

In the case of expense reimbursements, it is a good practice to arrange the supporting documents in the groupings and name order in which these appears in the payroll report.

A summary table showing the staff names, items and reimbursement amounts should act as the cover sheet.

If there are proration of amounts, for example medical reimbursements; the workings for the proration calculation should be shown, to enable them to be checked.

Check Against Subtotals

Wherever possible, group the personnel presented in the source documents according to the same grouping that you have adopted for the payroll. In this way, you can have subtotals for the different transaction items appearing on the payroll source documents, for example transport allowance, medical reimbursements, overtime payments.

In this way, you can check the subtotals against the subtotals generated by the payroll software in the payroll report. If you are using microsoft spreadsheet for payroll computation, it is a good idea to have subtotals and grandtotals for checking purposes.

Ensure Personnel Data in Payroll System Is Correct

The purpose of using payroll software is to automate some of the number crunching (computation) that a payroll administrator needs to make without the availability of a payroll system.

An example is the use of the staff’s birth date in computaion of pension payments. If the staff’s birth date is wrong, the pension payments would be wrong.

Ensure Parameters for Payroll Software or related Software Modules Are Updated As Required

Examples of payroll parameters that needs to be updated are dates of public holidays; changes in pension schemes. Examples of related software modules that needs to be updated include running of leave forfeiture; porting over of no-pay leave information.

Payroll administrators should have a written routine to help remind them that steps required for processing the payroll are taken, and taken in the correct sequence.

New Employees and Change of Bank Account

If you have a payroll software and had made arrangements with the company’s bankers to credit employees’s bank account with their pay, it is essential that you obtain the bank account details from the staff. This will happen in the case of new staff and staff who has decided to change their bank account.

Make use of a salary crediting authorization form. The staff will use this form to indicate the bank account number to be used fo salary crediting. Preferably, the staff could attached a copy of the bank book where it shows only the bank account number.

There are incidents where staff fills in the bank account number incorrectly. Although it is the staff’s mistake, but it becomes a hassle for the payroll administrator to make separate payment arrangements in order to ensure the staff gets paid.

It is also for the payroll checker to verify that the bank account number has been updated correctly into the payroll system.

Have Reference Information Sources on Hand

The payroll processing period is often a tight period. It is a good practice to keep reference information in an easily accessible location. Such reference would include company human resource policies; a list of reference websites; notes on salary computation. You would need to refer to these reference, for example if you forgotten how to compute the encashment of unutilized vacation leave.

Do Not Check Transaction Using Computer Screen

Your eyes sometimes can get tired or you could skip a line when you try to check payroll transactions on your computer screen. Please avoid relying on this method.

Have Ample Table Space

If you have a cluttered table top, you will find that it will be hard to spread out your source and reference documents as well as the payroll report for checking. Sometimes, you may missed a document because it got caught among the clutter.

Work with A Ruler and Pencil

Always print out your payroll report for checking against the source documents, last month’s approved payroll report, current month’s variance report using a ruler and pencil. This is more accurate method than trying to do the check by looking at the computer screen.

Have Someone Else Do the Final Check

Sometimes, the payroll administrator may have tired eyes, missed some details, read some information incorrectly. It is also a good measure to have somebody check the payroll.

Tips for Payroll Checkers

Before his or her eyes and mind gets tired, the payroll checker can start by checking the subtotals and grand-totals; then take note of new staff and staff that are leaving because pro-ration of salary that may be required; encashments of unutilized leave that had been earned; any variances indicated in the payroll variance report.

After checking these, the checker can then proceed to check the transactions.

Use a Payroll Variance Report

The purpose of using a payroll variance report is to utilize the concept of management by exception. The payroll checker looks for payments or deductions made for the new processing period that did not appear in the previous month’s payroll report and investigate to determine whether they are correct.

Use Last Month’s Payroll Report

The payroll checker would need last month’s payroll report if the variance report did not shows the base salaries.

Keep a Reconciliation Record

Sometimes, computation errors or information are missed are found after the payroll has been processed. These should be recorded into a record book so that the amounts are taken up in the following payroll processing.

Examples of other records could backpayments to be paid the following periods; final residual repayments of staff loans.

Payroll Records Management

There is a statutory requirement for organizations to keep their payroll records for a specified number of years. Sometimes, for operational purposes, senior management may require the records to be kept beyond the period specified by law.

Never depend on your memory to recall what have transpired during a payroll period. Sometimes, there will be items that was reconciled; items of special payments and so on. In such cases, you need to write down a note that could be referred to in the future when it is required to retrieve and report on old payroll records.

Make sure that related correspondence, such as copies of letters of promotions, salary increments, bonus payments and email instructions and approvals are kept. These are both your source and supporting documents, when it comes to audit checks to confirm that you have made proper payroll payments.

Ensure that proper lockable storage cabinets are available and records are marked and kept in chronological order. Remember that dampness and mould can destroy paper documents. Take the appropriate actions to prevent these from happening.