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Pay-Roll or Wages Sheet, Preparation of Pay-roll Homework Help, Tutoring
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Pay-Roll or Wages Sheet Assignment / Homework Help
Pay-Roll or Wages Sheet

Organization for preparing the Pay-Roll or Wages Sheet:

     For preparing the payroll, there should be a separate department called pay-roll department which helps in controlling labour cost & accounting for labour cost.

     Pay-roll department does the following:

(a) For each department, maintenance the records of job classification & for each worker in the department, maintenance of rates.

(b) Record as per time card, the time of each worker &/or record as per piece-work card, the output of each worker.

(c) On the basis of time or on the basis of output as the case may be calculation of wages.

(d) In order to show the net wages payable, make the necessary deductions from the gross wages. 

(e) For each separate department, prepare the pay-roll or wages sheet.

(f) Maintain a permanent pay-roll record for each worker.

(g) On preparation of payroll & the payment of wages, provide internal check.

(h) Furnish to the costing department all necessary information.

Preparation of Pay-roll:

     According to the practice of the organization, for each separate department, payroll is prepared weekly, fortnightly or monthly. If the worker is paid on the basis of time, wage for each worker is calculated as per his time card or clock card & on the other hand, if he is paid on the basis of result, he is paid as per his piece-work card. Analysis has to be done of the wage on the basis of time into (a) wages for normal hours worked, (b) wages for overtime hours worked, (c) wage for overtime premium hours, as, normally wage for normal hours & for overtime hours are to be considered as direct wage where as on the other hand, wage for overtime premium is to be considered as overhead.

      To show the net wages payable, deductions are to be made under different heads from the wages. Under the payment of Wages Act, some of the authorized heads of deductions are as below:

(a) House rent & payment for other provided amenities & services;

(b) Employees’ contribution to E.S.I.;

(c) Life Insurance premium under salary savings scheme;

(d) Provident fund contribution;

(e) Advance taken by the workers;

(f) Loans taken from co-operative credit societies;

(g) Income Tax;

(h) Others to be specified.

     In order to facilitate the payment of wages the preparation of pay-roll must be done without any delay & within the time laid down by the Payment of Wages Act.

Procedure for Payment of Wages:

    For each worker, pay slips are prepared in detail, after the preparation of the pay-rolls or wage sheet of all departments has been completed. Pay-slip is given to each worker in advance for the purpose of enabling him to check his calculations before he received the payment.

     The pay-rolls or the wage sheets are then sent to the cashier so that he can draw the money from the bank to make the arrangement for payment. Usually a packet containing the net wage is prepared for each worker & sealed after checking. In the presence of the responsible officer of the department where the workers works, & under the payee’s signature or thumb impression, disbursement of wages is made. If, on the date of the payment, any worker remains absent, his wage may be paid to a person who has been duly authorized by him. If no person has been authorized by the absentee to receive the payment, then in that case the cashier shall keep the amount with him after making due entry in the undisbursed wages book.

Possible Frauds in respect of Payment of wages:

     The following types of frauds may be committed & hence for the prevention the following measures needs to be adopted:

(a) Ghost workers may be there in the payroll.

(b) In the case of time wages, the working hours appeared from the clock card may be less where as higher figure has been stated in the pay-roll. 

(c) In the case of payment by result, units appeared from the piece work card may be less where as higher figure has been stated in the pay-roll.

(d) Higher rate of wage could be employed.

(e) Overtime wage, bonus etc. which are not due to the workers may be included in the pay-roll.

(f) Making of authorized deductions has been deliberately omitted.

     Worker when knows that the fraud has been committed in his favor, does not take the payment on the payment date but takes it on the later date, so that other people present at the spot could not detect the fraud.

      To prevent frauds the following steps should be taken:

(a) In the presence of the respective department heads, payment should be made to all the workers on the same day.

(b) The checking of clock time should be made with the time booked & idle time.

(c) Duly authorization should be made of the payment for overtime, idle time & for scrap & defective production. The checking of the authorization should be made with such payment shown in the pay-roll.

(d) Verification of rates with the schedule of rates should be made.

(e) The person who worked out the time from clock card or output from the piece work card should never be allowed to prepare the pay-roll.

(f) Verification of deduction from the deduction list should be made.

(g) Another person should check all the calculations in the pay-roll.

(h) Another person should check the counting of notes, coins etc. while making the pay-packets, before they are sealed. On the packets, they should put their signatures.

(i) Drawings from the bank should be equal to the amount of total net wages.

(j) Head office staff should make the payment to the outworkers.

(k) In the ‘undisbursed wages book’, recording of the undisbursed wages should be made & only after proper scrutiny of the person(s) & the reasons for absent on the payment date, payment of such wages should be made on a particular day in the week.

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