3 Key Controls In A Payroll System

checklist-2077018_640 All businesses who employ staff must rely on a series of controls to ensure that their payroll is being accounted for correctly. Depending on the nature and size of the business these controls can range from very basic to very thorough. Summarised below are some of the basic key controls that should be in place in a payroll system.

1. Separation of duties

Where it is practical, different stages of the payroll process should be carried out by different people. For example, the person who processes the payroll should not be the person who authorises the bank payment. Similarly, the record keeping function should be kept separate from the payroll function. Note: There are many other examples of duties that should be kept separate.

2. Physical controls

Where staff are paid based on hours worked, a time recording system should be in place (such as a clock in/clock out system). This will ensure that staff are paid for the hours that they work and not over or under paid. If timesheets are maintained then these should be approved by a supervisor before being passed onto the payroll department.

3. Review & reconciliation

Where there are layers of review in place, the risk of material misstatement decreases. Therefore, if it is practical, a system of checks should be performed by a reviewer and this reviewer must approve the transaction before authorising payment. Any unusual items should be investigated before approval. Unannounced spot checks should also be carried out from time to time. Reconciliations of payroll amounts and payroll taxes due should be performed regularly to ensure balances are in line with expectations.

What questions do you have?

We are happy to help. Please post your comment below or contact our friendly and knowledgeable team on 01 677 9000.  To keep in touch, connect with us on Linkedin. If this article helped you, please share it with other businesses.