The current economic outlook is set to have an impact on the bottom line, business and morale, but robust payroll auditing and management processes can curtail risk and support growth.
 
Even in a recession there are specific steps that can be put in place to mitigate risk and enhance payroll effectiveness, ensuring that finances are tightly controlled and that the organisation is prepared for what the recession has in store – spread the payroll load, use the insight from payroll data, and clearly document processes.
 
“The most common risk area in payroll departments is having one person responsible for the calculation of payroll values, reconciliation and payment,” says Cathie Webb, director, South African Payroll Association. “In a recession, when people feel their jobs and income are at risk, there is a temptation to help themselves to a little bit on the side.”
 
Webb points out that on a psychological level, incremental thefts are often not perceived as a crime. People think that the tiny sums won’t hurt the business. However, this is not true. Every cent removed illegitimately from a business has an effect on every person working there.
 
Reducing the risk
“The easiest thing to do to reduce risk is to ensure that the different areas of the payroll cycle are the responsibility of another person,” says Webb.
 
There must always be a high-level view over every aspect of payroll. In a large organisation, it is fairly easy to ensure that the payroll audit is managed by different people, but in a smaller business this may not always be possible. In this instance, there needs to be another person who does sign off and checking before payments are made.
 
“Payroll also plays a supportive role in tough economic times,” says Webb. “Strong payroll administrators should be looking for areas where they can add value and strategic input. For instance, in a multi-departmental branch or organisation, they can assess things like leave patterns and even identify management issues. Payroll has the ability to uncover behavioural patterns that can be managed or enhanced to boost business productivity, cut back on waste and even encourage growth in a recessive environment.”
 
Document and detect
Payroll can use its understanding of finances and budgeting to support employees and businesses in better managing money. South African suffers from a debt culture and few people save for the proverbial rainy day. Payroll’s role in educating people, showing them the value of not spending more than they earn and giving them the tools they need to save for the future, will play a role in the financial success of the organisation.
 
Finally, payroll’s place in protecting against the impact of the recession can be found in the documentation. Webb recommends that the payroll department has clear checks and balances that are adhered to rigorously as it is one space where mistakes and missed deadlines cannot be tolerated.
 
“This way, payroll frees their minds from having to remember the small things so they can focus on ways to add value,” concludes Webb.
ENDS
 
MEDIA CONTACT: Idéle Prinsloo, 082 573 9219, [email protected], www.atthatpoint.co.za  
 
For more information on SAPA please visit:
Website: http://www.sapayroll.co.za/
Twitter: @SAPayroll
LinkedIn: The South African Payroll Association

It’s not uncommon for a payroll to be consistently managed so poorly that workers threaten to strike over incorrectly administered pay. Often, the person administering the payroll is not adequately qualified for the job.
 
Lavine Haripersad, a Director of the South African Payroll Association (SAPA), says such risks are why hiring accredited payroll practitioners is so important. Yet, many employers don’t realise how much skill it takes to run a payroll. “There are literally hundreds of legal requirements and specialised procedures to follow,” she says. “It’s therefore critical that organisations have professional payroll administrators who know, understand and can practically implement them.”
 
So what do the top payroll administrators know (that business managers sometimes don’t)?
 
Correct Procedure
Payroll consists of various processes that must be correctly executed. “Qualified payroll administrators know these processes intimately,” says Haripersad. “These processes include record keeping, employee take-on, month-end procedures, year-end procedures, and more.”
 
Calculations
There are many complex payroll calculations related to tax, medical aid, pension funds, provident funds, allowances, reimbursements, deductions or bonuses. A payroll administrator knows how to perform them in accordance with the latest legislative requirements.
 
The law
Payroll is governed by an extensive set of legal and regulatory requirements. Payroll administrators are trained in the law and ethical governance, and keep themselves updated on new standards as part of their duties. “So they act as advisors to their organisations, guiding them in the right direction to avoid legal problems,” says Haripersad.
 
Information management
Payroll information and data must be collected, stored, secured, destroyed and used in accordance with various laws and accepted procedures. “The safeguarding of employee data must adhere to the Protection of Personal Information Act,” warns Haripersad. The proper information must also be submitted to the government at defined intervals. And correctly calculated payroll aggregates must be reported to accounting for recording in the general ledger. “Payroll administrators are well versed in the function of information inside and outside the organisation.”
 
Tax
Employee tax is so critical it demands special attention and skills only a professional payroll administrator can provide. This is especially true of larger organisations where the taxable portion of intricate remuneration, allowances, expense claims, deductions, bonuses or perks schemes is difficult to determine.
 
Ethical practices
Accredited payroll administrators are specifically disciplined in ethics and bound to the association’s Code of Professional Conduct. Not only do payroll administrators have an authoritative standard to work to; employers also have in SAPA a means to resolve unethical or unprofessional behaviour. The same can’t be said for non-certified administrators.
 
Project management
Payroll administrators are also trained to work in dynamic environments like project management where each payroll project might be different from the last. They therefore have project management training and can often act as project administrators.
 
Strategic advisors
Overseas companies see payroll for what it is - a key business enabler. International payroll administrators can work towards a Master's Degree in payroll management and provide direction to national and global payroll initiatives. But even a single organisation can derive such value from a well-trained payroll administrator.
 
Payroll administrators offer a wealth of knowledge that an employer can leverage to their benefit. Says Haripersad: “If organisations see payroll administrators as managers rather than workers, they will appreciate the strategic value they stand to gain from their input.”

ENDS

MEDIA CONTACT: Idéle Prinsloo, 082 573 9219, [email protected], www.atthatpoint.co.za  
 
For more information on SAPA please visit:
Website: http://www.sapayroll.co.za/
Twitter: @SAPayroll
LinkedIn: The South African Payroll Association

The Association of Certified Fraud Examiners says that payroll fraud is the No. 1 source of accounting fraud and employee threat globally. It affects 27% of all businesses and lasts, on average, 36 months.
 
South African statistics are scarce, mostly because payroll fraud is under-reported by companies jealous of their reputations.

A rare public case was the arrest in 2014 of two Eskom employees for tampering with the corporation’s payroll network system in a scheme that could have costed the company billions.  Research by Alexander Forbes in 2011 showed that payroll fraud was costing South African business more than R100-million a year.
 
“Payroll fraud is very much a reality and, in South Africa, my experience is that it’s most prevalent in medium to large companies that run electronic payroll systems, and where the number of employees makes manual checking difficult,” says Nicolette Nicholson, director at the South African Payroll Association.
 
She adds that payroll fraud is an occupation, “The books will be balanced legally on the system, because it has applied legislation. But typically, the fraud takes place when new data is entered onto the system, and that’s why it’s not easily picked up by financial audits.”
 
Nicholson explains that payroll fraud usually requires collusion between colleagues, and small transactions that do not trigger alerts are preferred—one reason fraud schemes go on for so long. Most payroll fraud hinges on overtime claims, the payment of salaries to ghost employees whose bank accounts are controlled by the fraudster, dishonest expense claims and the payment of an extra month’s salary when an employee resigns or dies.
 
Causes for payroll fraud include intent and character, as well as peer pressure – where a person’s financial circumstances make them vulnerable to syndicates.
 
Nicholson advises that the best defence is to make a company a low-risk candidate by following these tips:
 
- Put controls in place from the beginning. Duties related to payroll processes should be rigorously segregated, with different people responsible for input, approval and release as a minimum. Frequent spot audits should be performed in addition to external audits, which do not cover segregation of duties. 

- Use external fraud examiners, as most fraud is committed by managers, an external agency should be used to undertake fraud checks. 

- Ethics management is a pillar of King III for very good reason: if the company’s code of ethics is truly embedded into the corporate culture, the occasional rotten apple will find it harder to identify accomplices. 

- Achieve process stability. Pay day is an emotive issue, so small issues tend to get ignored in favour of getting the payroll run underway. It is critical to keep to payroll procedures and cycles, or controls will be abandoned. 

- Empower employees. Very often, blue-collar workers may be barely literate or may have a culture of not questioning payment. Work with union or employee representatives to educate employees about what information should appear on their payslips, and encourage them to check that information for accuracy. It should also help nurture a culture of trust that is likely to impact positively on productivity generally. 

- Leverage the power of data. Put basic business intelligence capabilities in place to enable exception reporting and trend analysis to spot anomalies in overtime, PAYE, tax on bonuses and so on. Early detection is critical. 

- Stern consequences. Criminal action should be taken against an employee caught committing payroll fraud, if the consequences are kept to a mere human resources disciplinary or suspension, the guilty party can go onto work for the next company where he/she can continue their misconduct. This is because the Labour Law does not allow unwarranted reference, in other words, if the guilty person’s potential new employer calls the previous employer for a reference, they cannot divulge anything about the person’s fraudulent activities. However, if the person is pursued criminally, the previous employer is allowed to do so. 

“Fraud can have serious consequences for any company, both financial and in terms of the corporate culture,” concludes Nicholson. “Making it hard to commit it in the first place makes good business sense in every way.”
ENDS

MEDIA CONTACT: Idéle Prinsloo, 082 573 9219, [email protected], www.atthatpoint.co.za  
 
For more information on SAPA please visit:
Website: http://www.sapayroll.co.za/
Twitter: @SAPayroll
LinkedIn: The South African Payroll Association

Payroll data is often overlooked in keeping a business financially aware during difficult economic times.

“Not only can the data gleaned from payroll functionalities allow for the business to streamline costs, but it can provide significant control over planning, accounting and management,” says James McKerrell, chairman of the South African Payroll Association (SAPA).

According to McKerrell, the payroll function manages a large portion of the most valuable information inside the organisation – data. The data allows the business owner to understand trends and make strategic decisions based on the costs of employees and their roles within the organisation.

Employee morale boosted
By analysing payroll data effectively, business owners can determine trends in employee costs such as with standby, overtime and shift allowances. Payroll data and comparative reporting against productivity and historical data lets the business owner potentially establish how a particular overtime cost could balance the cost of hiring new employees.

“This then has the knock-on effect of leading to improved productivity as employees who constantly work overtime are often tired and stressed which leads to lower performance, work quality and morale,” says McKerrell.

Employee costs kept to a minimum
Payroll data can also show whether hiring a freelance or contractor would either increase or reduce costs. Often contract or freelance employees are more expensive than permanent employees. However, if the business requires once-off or short term support for additional skills on a project basis, this data can reveal how costly it is and allow for the organisation to factor these overheads into their quotations or projects.

“When management gets sight of this information in a real-time environment, strategic decisions can be implemented far more effectively,” advises McKerrell.

Payroll data adds value to the business in the form of better productivity, improved cost control and long-term financial management.  These are valuable boxes to tick, especially when they also potentially allow for improved employee wellbeing and morale over the long term.

ENDS

MEDIA CONTACT: Juanita Vorster, 079 523 8374, [email protected], www.atthatpoint.co.za  

For more information on SAPA please visit:
Website: www.sapayroll.co.za
Twitter: @SAPayroll
LinkedIn: The South African Payroll Association