HR AUDIT: PAYROLL AUDIT
Nelson Ogudha, People Analytics Leader
Award Winning HR - HR Trendsetter of the Year | HRIS specialist | People Analytics | HRBP |
Where & who should process the payroll, HR or Finance or Outsourced firm? That depends on your company’s needs and structure. It doesn’t shift payroll cost ownership from the HR department. Keeping this in mind, the HR Department Head should be proactive to ensure that payroll processing meets the ethical standards i.e. minimum wage, tax remittance, confidentiality, and integrity.
How do we manage payroll, keep track, and ensure that our payroll meets the set standards as HR professionals? The answer is the periodic payroll audit. The periodic audit starts from monthly, quarterly to yearly. Payroll involves regular updates & I would recommend monthly audit as a measure of efficiency and effectiveness.
Payroll audit is an examination of payroll processes for assurance and accuracy.
Below is a simple procedure of how to conduct an HR Audit.
1. Determine when to conduct the audit and communicate in advance. Remember you might need some confidential information that is not within your reach.
2. Check on payroll management policy and procedure, if outsourced, check the service level agreement or the terms of reference. Use these to create a checklist on areas of concern.
3. Run reports on basic employee data. Ghost employees might be there!
4. Sample the employees to confirm their payroll details in full. How do you do sampling?
5. Generate full payroll list including all employee, their incomes, expenses, deductions, and net pay.
6. Employ verification techniques on related calculations such as tax charged vs gross amount or tax charged vs net pay, NHIF deduction vs gross amount
7. Compare the difference in amounts paid in the current month vs previous month. The difference should be supported by proper documentation.
8. Confirm authorizations and bank submissions.
9. Compare the budget payroll cost vs the actual cost.
10. Compile your report giving recommendations & conclusion
The audit can be done by internal employees or by an external consultant of your choice. Confidentiality is key for the auditor you are choosing. Implementation of Non-Disclosure Agreement is applauded.
Gift me a comment or like. Thank you in advance.
NB: This is a piece of basic information from my opinions that you can build on & not gospel truth.
Nelson Ogudha (MIHRM)
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Bachelor of Arts (Masinde Muliro University of Science and Technology)
4 年In my view,it ought to be handled by HR department,but again Finance department has its take in it.
AUDIT.RISK&COMPLIANCE
4 年Satisfactory..
Financial Analyst with over seven years of experience including audit, tax, accounting, data analytics, financial modelling, financial planning and reporting, internal controls and regulatory compliance.
4 年In my opinion it should be more of a HR role and finance should only come in during payments. Finance would also provide a good support in matters audit of payroll figures. Why I am saying this is because anything that touches employees data should be handled with utmost confidentiality. For tax purposes it is prudent to also do a reconciliation of figures as per payroll to figures booked by finance. Emphasis being on commissions, allowances, statutory payments, final dues treatment, gratuity provisions, car benefits....
HR Business Partner
4 年In my view, payroll is more inclined to HR other than finance. However in most cases, both departments have a role to play. I would advocate for monthly audit in order to handle any discrepancies in good time.
Turning complex raw data into simple concepts management can act on | Corporate & Personal Accountant | Compliance & Cost Accounting.
4 年HR and Finance should work together on matters payroll.