BSBFIM502 Manage Payroll

Explain Five (5) procedures that can be used to ensure confidentiality and security of payroll information.

What procedures would you ensure in place in an organisation that would guarantee substantiation of claims for allowances are correct.

List Five (5) control measures you would consider to safeguard organisation’s financial resources in accordance with legislative and organisational requirements

Some Statutory obligations of an employer is required to meet are: Pay As You Go withholding (PAYG), Payment of super obligations and Fringe benefit tax payment (FBT). What are some of the systems that can be established to ensure the statutory obligations are met and records are kept for the period determined by the legislation.

The confidentiality and security of the payroll information is essential for every organization because the revelations of this information could give advantage to the competitors (Campbell, 2016). The five procedures which an organization can use to ensure that the information related to payroll is kept confidential are given as below:

• First thing needs to be done is to ensure that the physical security of the records is intact. There must of adequate safeguards against physical loss of records from the payroll department.
• Further, there must be limits of access to the payroll information according to the designation of employees.
• The computers and other electronic resources should be properly safeguarded against the loss of information through hacking.
• The key payroll information must be under the responsible and accountable authority (Campbell, 2016).  

The employees are allowed various types of allowances from their salary such as house rent allowance, medical allowance, and travelling allowance. Further, the employees are also allowed reimbursement of various expenses incurred in connection with employment (Bieg and Toland, 2016). The management needs to devise such a system that the employees do not claim fake allowances or expenditure for reimbursement. As part of the control procedures, the management should verify the actual bills of expense for which allowances or reimbursement is to be claimed. The adequate level of authority should verify the bills to check whether the bills are genuine or not. Further, the payment of bills to the employees should be verified with the bank statement to ensure that amount paid is same as approved by the authority (Bieg and Toland, 2016).     

The five controls which are essential to safeguard the financial resources of an organization are listed as below:

• The management should devise policies and procedures to the protection of assets of the organization for being miss-utilized.
• There must be budgets in place to control the expenditure and ensure that the financial resources are being utilized optimally (Tarantino, 2010).
• The management must conduct variance analysis and find out the causes of over expenditure and this analysis should be followed by an action plan to reduce the chances of happening it again.
• There must be reconciliation mechanism in place to ensure adequate safeguard of organizational resources.  
• The separation of duties should be done effectively so that any type of collusion between the employees for miss-utilization of the organization’s assets could be eliminated (Tarantino, 2010).  

In order to comply with the statutory obligations related to Pay As You Go (PAYG), super funds, and fringe benefit tax, the management should make the staff aware of the legal provisions. The staff must know the amount to be deducted from the employee’s gross pay in regards to PAYG and fringe benefit tax, and the percentage amount to be contributed to super funds (Marsden, 2010). Further, the due dates on which the amounts to be remitted to Australian Taxation Office or super funds as the case may be should be known to the personnel vested with this duty. The amount of PAYG, fringe benefit tax, and super contributions must be verified by appropriate authority. There must be reconciliation system in place to ensure that the amount remitted is correct (Marsden, 2010).         

The hourly and weekly gross pay for Daniel as computed using pay calculator has been shown below. As per the description given, the suitable level for Daniel is level-3:

David would get a refund of $1,320 (2000km*$0.66) for car allowance.

The payroll processor prepares payments to be made to the employees and based on that the payments to be remitted to the Australian Taxation Office (PAYG) and super funds are prepared. There are fixed due dates for payment of salary to employees, remission of payment to Australian Taxation Office and super funds. If delay is made in payment, it will lead to penalties on the company, thus, in order to avoid the penalties and fines it is important to provide all necessary information to the payroll processor on a timely basis (Dlsweb, 2017).        

Following checks should be applied on payroll before submitting for authorization for final payment:

• Check that the payroll amount is computed correctly.
• Ensure that the reconciliation of payroll has been done and if there is mismatch, the corrective actions have been taken appropriately.
• Check that PAYG tax has been correctly deducted and remitted to the government (Gruen, 2006).

In order to ensure that the employees are paid correctly and the trial balance and journal ledgers do not go out of balance, it is necessary to carry out reconciliation of the salary and deductions such as PAYG and Super fund. The reconciliation should be prepared in accordance with the policies and procedures set out by the organization (Hightower, 2008). The following points should be considered while checking that the reconciliation has been prepared as per organization’s policy:

• Ensure that there exist effective controls over the payroll preparation process.
• Ensure that an appropriate level of authority is there to monitor the payroll function.
• Ensure that the staff engaged in payroll management consists of adequately qualified and experienced personnel.
• Conduct audit of payroll payments and review of the report of auditor to find that payroll reconciliation is done in accordance with organization’s policy (Hightower, 2008).     

The non-payment of overtime to the employee would require an investigation into the payroll payments. As per our organizational policy, the queries in regards to defect in payment of salary or wages are entertained by the payroll department after 5 days of salary payment. Further, the queries are finally resolved within 10 days from the date of application received by the payroll department. At the first instance, the payroll query is taken up by the payroll assistant and investigated into for errors. The payroll assistant prepares report of errors found in payment and submits it to the payroll manager. Then payroll manager approves the release of payment for erroneous short payment of overtime (Hightower, 2008).       

There are two types of declaration forms namely taxation file number declaration form and withholding declaration form which an employee is required to submit to the Australian Taxation Office (Dlsweb, 2017).    

The taxation file number declaration form contains basic information regarding the tax payer such as tax file number, name, address, and residential status. Further, this form also contains information of payer with regards to Australian Business Number or Withholding Payer Number (ATO, 2017). The withholding declaration form gives authority to the payer to deduct the amount of tax at the time of payment. It contains information in regards to payee as well as payer. The information contained in this form is essential to determine the amount of tax withholding correctly. In regards to payee, the information as to claim of tax free threshold, accumulated education loan, and accumulated financial supplement debt is contained in the form. Further, in regards to the payer, the form contains information such as rate of tax withholding, and the general information like Australian Business Number, name, and address (ATO, 2017).      

The four periodic deductions that are required to be forwarded to the respective creditors in the payroll process are given as below:

• PAYG deduction: The payer is required to remit the amount of PAYG collected from the payees on quarterly basis (ATO, 2017).
• Super Guarantee Deduction: The amount is required to be remitted by 28^thof the month following the quarter (ATO, 2017).
• Fringe Benefit Tax: The fringe benefit tax is required to be paid by 21^stmay each year to the Australian Taxation Office (ATO, 2017).
• Life Insurance Deduction: The timelines for payment of life insurance would also depend upon the policy of the insurer. However, generally the date of payment remains 7^thof the next month.

The fringe benefit tax is levied on the additional benefits paid by the employer to the employees. This is a separate tax for which the employer is required to get registered separately (ATO, 2017). The amount of fringe benefit tax is computed by multiplying the prescribed rate with the amount of additional benefits given. The employer is required to lodge a separate return for fringe benefit in the prescribed form by 21 may every year. While preparing the return of fringe benefit tax, it is to be kept in mind that all fringe benefits are not reportable and hence only the reportable fringe benefits are to be included in the return form.

The amount paid as salary as shown in the payroll summaries should match with the amount shown in the salary records. If there is no mismatch between the two figures, it is considered that the payroll summary reconciles with the salary records.

The PAYG payment summary statement is prepared to provide a summary list of all payments made during a financial year by the employer to the employees. The summary statement contains details of salary and wages paid during the financial year, which is helpful when preparing the payroll report. The statement facilitates a cross examination of the amount of salary and wages paid (ATO, 2017).      

Policies and Procedures: Payroll

Our policy with regards to payroll is that the permanent employees will be paid on monthly basis and casual or temporary workers are to be paid on weekly basis. The payment of payroll is to be made directly to the account of employee/worker through online fund transfer. The amount transferred to the account of employee would be net of deduction for PAYG and super contributions. In regards to this policy, following procedures are listed:

• The payroll supervisor is to maintain the records of days worked, leaves taken, and leaves remaining un-availed.  
• The payroll assistant is to prepare monthly/weekly salary sheets computing the amount to be paid to the employees.
• The payroll assistant is to prepare summary statement of PAYG deductions for all employees and remit the same as per guidelines of ATO.
• The salary sheets are to be reviewed by the payroll manager and to be cross verified with the summary statement of PAYG (Bragg, 2005).   

Confidentiality and Security of Payroll Information: Policy and Procedures:

It is the company’s policy to keep the employee information whether personal or related to pay grade, highly confidential. For this purpose, the employees are expected to observe the following procedures:

• The recruitment of personnel is done through a standardized process.
• The documents of personal details of the employees are kept in separate files and files are kept under custody of Payroll manager.
• Access to payroll records is not to be allowed to the unauthorized persons (Bragg, 2005).     

Claims for Allowances: Policies and Procedures

Our policy is to maintain adequate controls over the process of claim for allowances so as to ensure that genuine claims are allowed and paid to the employees. In this regards following procedures are to be observed by the employees:

• The claims are to be submitted in the prescribed form only.
• The particulars of claims are to be verified by the payroll assistant with the original bills and vouchers.
• Finally, the claims are to be reviewed by the payroll manager before authorizing for payment (Bragg, 2005).   

Statutory Obligations: Policies and Procedures

The compliance with respect to the statutory requirements is on top priority of the organization. For this purpose, the following procedures are to be observed:

• A list of statutory requirements including return lodgment and payment of PAYG tax and super contributions is to be prepared by the payroll assistant.
• The important due dates in regards to payment of PAYG and super contributions are to be kept on records.
• The payroll manager is to take responsibility to seek compliance with statutory requirements (Bragg, 2005). 

References

ATO. 2017. Declaration form. [Online]. Available at: https://www.ato.gov.au/uploadedFiles/Content/MEI/downloads/IND17332nat3093.pdf [Accessed on: 22 June 2017].

ATO. 2017. FBT Return. [Online]. Available at: https://www.ato.gov.au/Tax-professionals/Prepare-and-lodge/Tax-agent-lodgment-program/Obligation-type/FBT-return/ [Accessed on: 22 June 2017].

ATO. 2017. How to Calculate Your FBT. [Online]. Available at: https://www.ato.gov.au/General/fringe-benefits-tax-(fbt)/how-to-calculate-your-fbt/ [Accessed on: 22 June 2017].

ATO. 2017. Pay As You Go (Withholding and Installments). [Online]. Available at: https://www.ato.gov.au/Business/Reports-and-returns/Due-dates-for-lodging-and-paying/Due-dates-by-topic/Pay-as-you-go-(withholding-and-instalments)/ [Accessed on: 22 June 2017].

ATO. 2017. PAYG payment summary statement. [Online]. Available at: https://www.ato.gov.au/forms/payg-payment-summary-statement/ [Accessed on: 22 June 2017].

ATO. 2017. Super Guarantee. [Online]. Available at: https://www.ato.gov.au/Business/Reports-and-returns/Due-dates-for-lodging-and-paying/Due-dates-by-topic/Super-guarantee/ [Accessed on: 22 June 2017].

ATO. 2017. Tax file number declaration. [Online]. Available at: https://www.ato.gov.au/uploadedFiles/Content/MEI/downloads/TFN-declaration-form.pdf [Accessed on: 22 June 2017].

Bieg, B.J. and Toland, J. 2016. Payroll Accounting 2016. Cengage Learning.

Bragg, S.M. 2005. Payroll Best Practices. John Wiley & Sons.

Campbell, T. 2016. Practical Information Security Management: A Complete Guide to Planning and Implementation. Apress.

Dlsweb. 2017. Declaration forms. [Online]. Available at: https://www.dlsweb.rmit.edu.au/toolbox/busadmin/topics/topic52/t52_01.htm [Accessed on: 22 June 2017].

Dlsweb. 2017. Prepare payroll data for forwarding to head office. [Online]. Available at: https://www.dlsweb.rmit.edu.au/toolbox/busadmin/topics/topic25/t25_03.htm [Accessed on: 20 June 2017].

Gruen. 2006. Fin Mgmt in Health Services. Tata McGraw-Hill Education.

Hightower, R. 2008. Internal Controls Policies and Procedures. John Wiley & Sons.

Marsden, S.J. 2010. Australian Master Bookkeepers Guide [2009/10]. CCH Australia Limited.

Tarantino, A. 2010. Financial Internal Controls Best Practices. John Wiley and Sons.