1.3.3. Human resources cycle PDF

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Human resources cycle Functional areas 1. Personnel 2. Time keeping 3. Calculation and recording of salaries and wages and deductions 4. Payment preparation and payment of salaries and wages 5. Payment of deductions 6. Recording of salary and wage transactions in the accounting records      

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New appointments or replacements must be authorized by the principal by signing the payroll amendment form Background checks must be made on potential employees as well as interviews conducted to verify the background of newly appointed employees A senior personnel member must confirm that there is sufficient budget available before appointing new employees Amendments to the payroll must be compared to the payroll amendment forms on a regular basis (if it says monthly, then say weekly etc.) Payroll amendment forms should be filed in sequence and checked for gaps on a frequent basis by any of the senior personnel member With regards to dismissals, changes in pay rates and promotions, the following needs to be communicated with: o Employees o Unions o Laws and regulations After collecting the clock cards, the following procedures need to take place by the assistant foreman: o The number of cards collected must be agreed to the employee list o A calculation of ordinary time must be performed o A calculation of overtime must be performed Before the clock cards are transferred to the wages clerk: o The foreman must inspect that calculations performed by the assistant foreman o The foreman must authorize overtime worked by wage workers o The foreman must ensure that the clock cards are complete The wage clerk must sign the clock cards as proof of accepting responsibility when receiving it from the foreman The wage clerk must identify and agree amendments made to the payroll based on period to period wage reconciliations with the applicable amendment forms The dealer principal must perform the following duties before he authorizes the payroll: o He must verify the recorded working time against the clock cards o He must agree any deductions with tables or any other supporting documentation o He must reperform any calculations on the period to period wage reconciliation o He must verify the amendments to the payroll with the personnel amendment forms and supporting documentation The period to period reconciliation must be presented to the cheque signatories when the wage register is presented for payment authorization The cheque signatories must perform the following duties before the cheque is signed: o Review the payroll for unusual items o Inspect that it is signed by a senior personnel member where he takes responsibility for the preparation thereof

The payroll and payroll reconciliation must be signed as proof of inspecting it before signing the cheque The payment advices must be created and included in the pay-packet where the cash is included The names and employee numbers of employees must be clearly indicated on the exterior of the pay-packet The principal must sign the payment advice as proof for receiving the wages in his office The principal must agree the number of pay-packets received with the number of employees on the payroll The employees must sign the payroll as proof of receiving their wages The employees must be requested to count the cash in the wage-packet before leaving the principal’s office Unclaimed wages must be noted on the payroll next to the name of the employee Unclaimed wages must be recorded on an unclaimed wage register Follow ups must be conducted on the unclaimed wage register on unusual trends of absences during wage payments There must be two employees who perform the wage pay-out and they must sign the payroll as indication that the wage pay-out is completed Unclaimed pay packets must be agreed back to the payroll (for employees who have not signed) Unclaimed wages must be banked after being unclaimed for a period of two weeks There must be a clocking machine at every entrance to the factory The number of clock cards placed on the clock card rack must be compared to the number of wage workers on the authorized wage employees list The clock card rack must be situated at the clock card machine The manager must supervise the clocking process The HR clerk must count and sign for the clock cards received The HR clerk must record control totals (e.g. number of clock cards, total hours, normal or overtime hours) in a batch control sheet The batch of clock cards must be checked and authorized by a senior official before the batch is transferred to the payroll preparation The HR clerk must sign the wage register as proof of carrying out her responsibilities HR clerk must be responsible for calculating the total wages The wages clerk must prepare a record of the control totals including the normal hours and business hours per section The batch controls must be agreed with the wage register by the wage clerk The wake clerk must sign the schedule of the weekly wages and reconciliation before sending it to the head of the payroll The normal and overtime hours must be authorized by a manager after it has been calculated by the HR clerk A supervisor or second wage clerk must: o Verify the hours and rates used against clock cards and the employee list o Sign the payroll The electronic transfer requisition must be signed by two signatories Raising and paying the deductions must be done by separate employees The supporting documentation must be presented with the cheque for the deductions to the cheque signatories Pay overs to SARS and UIF must be done on a monthly basis Reconciliations of the deductions must be done monthly The reconciliation must be reviewed and signed by a senior official Independent monthly scrutiny of the general ledger accounts must be carried out by a senior manager Pay slips must be issued when the wages are paid out o

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All requests for appointment of new employees must be motivated by the specific department that requires the employee Payroll amendment forms must be completed for amendments to the payroll Completeness and validity of changes must be followed up on a regular basis Clock cards must be generated from an authorized list of employees Clock cards must be divided into workable batches to ensure accuracy There must be a second paymaster present at the wage payout There must be segregation of duties between: o Reconciling the wage control sheet to the payroll o Handing out the pay packets o Safeguarding the unclaimed pay packets o Following up on unclaimed pay packets o Appointment of new employees o Authorization of employee conditions on the payroll o Amendment of employee conditions to the payroll Employee files must be filed in a safe filing system Competent employees must be responsible for remuneration-related tasks and hiring administration employees New contracts must be signed by a senior manager There should be physical controls over drawers that have confidential information A proper recruitment policy must be in place Temporary employees must also receive a written contract at the start of their employment periods There must be a proper overtime policy Copies of employee documents must be certified Foreign employees must be requested to provide work visas There must be a valid dismissal policy in place Entrance access must be limited Clock cards must be controlled by a clock-card register to ensure completeness of the clock cards Calculation of the total number of hours worked must be checked by an independent person for validity and accuracy There must be sound controls to ensure that only authorized changes are made to the database Physical controls must be in place over the security of cash

Risks  Misuse of clock cards  Input errors could go undetected  Incorrect amounts could be paid to employees  Cheque fraud  Accuracy and completeness of clock cards or the expense  Unauthorized changes could be made  Incorrect capturing of information might go undetected  Incorrect amounts could be placed in the pay packets  Foreman could fraudulently picket worker’s pay packets.  Ghost employees might not be detected  Wages can be stolen from the unclaimed wages if there is no unclaimed wages register  Theft of money  Confidential documents could go missing  Errors while performing tasks  Hiring unqualified individuals

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Errors could be made if information is copied from an unauthorized document (email) which can result in employees receiving incorrect amounts Fictitious or ghost employees could be created or changes in rates of pay for those employees who are friends with the HR clerk Employees could gain access to confidential information Incorrect information could be communicated to the employees Unwarranted overtime hours could be worked Disappearance of confidential documents Foreign employees could be illegally employed Laws and regulations not followed could lead to legal consequences for the company Payments made to fictitious employees Employees could be recording time for other employees who are not at work, or recording incorrect time on their own clock cards Overtime hours could be invalid

Recommendations  Blank clock cards should be controlled and prepared by a time clerk before being used by employees  Workers names and employee numbers should be recorded on the cards by the time clerk  Wages should be paid out by the disbursing clerks in the presence of the relevant foreman, who should identify the workers individually  The supervisor should observe workers clocking in and out so that only one clock card is filled by each worker  Each foreman should hand the week’s clock cards to a specific wage clerk  Every person handling clock cards should first count and balance clock cards for completeness before signing a clock card register so that no clock cards will be lost  Each wages clerk should be responsible for specific tasks in the wage system  No clerk should perform all the tasks in the wage system from beginning to end  Therefore, there should be different employees doing the following: (between the different wage clerks) o Calculating total hours worked o Filling the pay packets o Posting to the general ledger o Receiving back unclaimed wages  An independent person should check that calculations and initial each clock card as evidence of having done so  Overtime hours should be approved by the relevant foreman by initialing of the clock cards  An employee other than the wages clerk entering the hours worked into the computer should compare input to output for correctness and initial the wages report as evidence of having done so  A responsible official should review the weekly wages report for reasonableness and sign as evidence  The accountant should prepare and sign a wages cheque only after he has reviewed the approved wages report  The wages cheque should be countersigned by the production manager in order to improve control over the wages  A responsible official should reconcile the week’s total wage increases, overtime, absenteeism, new appointments and resignations  Access to the permanent records in the database should be restricted by password control. Only the HR division should be able to record such changes

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The accuracy of changes to the permanent records of workers should be checked by the human resources manager who should sign the printout listing changes to these permanent records as evidence of having done so The accountant or production manager should attend wage pay-outs on a surprise basis The accountant or production manager should examine the pay packets prior to pay-out on a test basis A copy of the wages report should accompany pay-packets so that the situation can be controlled and workers can sign the report that they have received their pay packets Unclaimed wages should be marked as such on the wages report by the disbursing clerk At the end of each department’s pay-out, the disbursing clerk and the foreman should account for the envelops in respect of unclaimed wages and should sign the wages report as evidence that: o Envelops relating to the items marked “Paid” have been properly distributed o The envelops for items marker “unclaimed” were in the hands of the disbursing clerk at the end of the payout A security firm should be appointed to draw the cash, fill the pay packets and perform the payouts. Alternatively, two persons should draw the cash and fill the pay packets in a secured room. Filled packets should be stored in a safe, and a security guard should be present at each payout Unclaimed wages should be controlled by means of a register and the wage packets should be kept in a safe in the accountant’s office and redeposited after two weeks if still unclaimed...