The next eight policies are useful for enforcing payroll-related controls. The first five policies are targeted at employees in general, enforcing various rules that reduce the amount of data entry and tracking work by the payroll staff. They are:

1. Hourly employees must submit an approved time sheet by the designated date and time in order to be paid as part of the regular payroll cycle. Though difficult to enforce, this policy puts the burden of time sheet submission on individual employees rather than the payroll staff.
2. The company does not make purchases on behalf of employees. This policy keeps the payroll staff from having to track a series of periodic deductions from employee pay in order to cover the cost of items purchased by the company for employees. From a control perspective, it also eliminates the risk to the company that an employee will leave the company prior to paying back the funds expended for the purchase.
3. The company does not issue advances on company pay. This policy keeps the payroll staff from having to manually enter pay deductions into the payroll system to offset pay advances, thereby reducing the risk that deductions will be incorrectly entered or not entered at all.
4. Employees shall not be allowed to carry forward more than __ hours of vacation and sick time into the next calendar year. This policy ensures that there is no risk of excessive vacation or sick time payouts to a de­parting employee that would otherwise occur through the ongoing ac­cumulation of earned vacation and sick time.
5. All employees shall be paid by direct deposit or payroll card. This policy is useful for switching 100 percent of employees to electronic payments, thereby avoiding several control problems associated with making check or cash payments.

The next two policies are strictly control-oriented, requiring secure stor­age of employee files and enforcing the segregation of certain tasks.

6. Pay-related authorizations shall be stored in a central employee file. This policy ensures that access to all pay-related authorizations can be restricted easily, while also reducing the likelihood that authorization documents can be lost. Authorizations should cover such items as pay rate changes, benefits, tax withholdings, and changes in employment status.
7. No employee can be responsible for both processing payroll and dis­tributing pay. This policy ensures that proper segregation of duties keeps anyone from creating a paycheck, recording it, and then pocket­ing the funds. This policy is mandatory if payments are made in cash but is not necessary if payments are distributed electronically.

The final policy is a general requirement to remit tax payments in a timely manner.

8. Payroll taxes shall be remitted in full on a timely basis. Though obvi­ous, this policy makes it clear to the payroll manager that taxes must be remitted in the full amount and on time, with no exceptions. Late tax remittances can entail large penalties and late fees, as well as personal liability by company officers in some states, so this is a major policy to enforce.

Tags: payroll related control