1. The 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.

2. key 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

3. Human 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

4. HRM 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

5. HRM 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

6. Rates 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

7. Maintenance 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

8. Employee 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.

9. Payroll 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

10. The gathering of time and attendance data
Methods commonly used:
Clock cards
Time sheets
Timebooks

11. The calculation of the gross amount payable
Gross pay consists of:
pay for normal hours worked
pay for overtime worked
commissions
incentive pay
other allowances

12. Tax 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

13. Disbursement 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

14. Payment 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

15. Other payroll related expenses
Payroll tax
Superannuation Guarantee Scheme
Fringe benefits tax

16. Payroll processing flow chart

17. Internal control procedures for the payroll 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

18. Computer application systems for the 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

19. Overcoming payroll irregularities
Improper recruitment procedures
Noncompliance with employment laws
Unauthorised changes processed
Incorrect data is input
Inaccurate calculations