Payroll is at the heart of any business. It is the one financial function of any business that must be punctual and accurate. It also has enormous potential for assisting in other areas of the business.
Even a small delay in paying staff can trigger a range of consequences from staff discontent through to full-scale industrial action. An underpayment or overpayment to an employee can cause problems as the employee will demand prompt correction and have a negative view of the company. Sometimes there are legal and practical reasons which prevent you from recovering an overpayment.Checkout Nominak for more info.
Every industrialised nation now has detailed laws on employment conditions. Although they tend to include similar elements, there are still significant differences. Overlooking a legal detail can bring serious penalties. It can also lead to significant errors in costing if some payroll costs are overlooked.
Payroll is also obviously vulnerable to security risks. There is opportunity for fraud, including putting ghosts on the payroll. There is also a security risk as the information is sensitive.
These are all very good reasons for you to run an in-house self-assessment/audit of your payroll and payroll function. But a payroll audit is not just concerned with avoiding mistakes. Payroll can also be used as a powerful management tool. Employees often trust payroll staff more than other accounts or personnel staff. Payroll data can also contain useful information about employees which may need to be shared with other departments. Finally, payroll functions can be integrated with other functions.
Too often businesses see payroll as no more than an administrative function, no more important than window cleaning.
The audit of payroll extends beyond ensuring that payslips are properly prepared and statutory returns are filed. The payroll audit should check that the most effective methods of determining employee payment are used, and that all elements of the payroll resources are used for maximum efficiency.