By Alan McEwen
If you work in payroll, you probably spend a good deal of time pouring over payroll registers.
And the more systems you gain familiarity with, you may come to realize that not every payroll register is the same. So what are best practices in payroll register design? That’s what this article sets out to describe.
However, we first have to consider what purpose payroll registers serve:
• Payroll registers provide the information needed to validate individual payroll calculations. For example, when setting up new employees, you look to the payroll register to ensure the right earnings, benefits and deductions are being processed.
• Payroll registers provide the information needed to balance each payroll run. A best practice is to balance changes between payroll runs by comparing previous and current payroll registers, and reconciling any differences in these to a separate listing of setup or transaction changes applicable to the current period.
• Payroll registers can be used to test the accuracy of payroll year-to-dates (YTDs). At some point, everyone in payroll has taken the prior period YTDs, added the current period results and compared these to the system YTDs after current payroll processing.
We also have to take into account the primary constraint in payroll register design — balancing the physical space available against having a register that is easily readable. For the most part, payroll registers contain the same information as on direct deposit or pay statements.
However, pay statements are printed one to a page, whereas the goal of a payroll register is to cram as many employees on to a single page as possible. The best payroll registers do this in such a way that it’s still possible to quickly find the information needed.
Let’s now examine how the above affects good payroll register design.
The main body of any payroll register is a set of gross-to-net calculations by employee. Employees generally only appear once on a payroll register, but if there are off-cycle or exception payments, such as bonuses, there may be multiple such entries. Similarly, there may be multiple entries if employees work concurrently in more than one business unit or division.
The register entry for each gross-to-net has two parts: first, one that defines the context for this calculation and second, the earning, deduction and benefit (or other) calculation values.
The best practice is that this context should include information that defines:
• the employee (first and last name and employee number)
• the pay period (number and the first, last and pay dates)
• how any net owing was paid (method, number and status)
• setup values that affect source deductions, such as province of employment, TD1 claim amounts, additional income tax requests or letter of authority amounts — having all this shown on the payroll register makes it much easier to validate source deduction calculations using the CRA’s Payroll Deductions Online Calculator (PDOC).
The best practices for earning, deduction and benefit values are:
• For earnings, both current and YTD values are given for units and amount, by rate. Without earnings detail by rate, the only way to validate an earning is to divide its amount by its units. However, this only works where a single rate applies for whole pay period.
• Earning, deduction and benefit amounts, as well as earning units, are totalled for each separate gross-to-net.
• The same totals are shown for the register as a whole, as well as for any sub-totals by department.
• These totals also give the count of employees included. This makes it easier to verify the number of employees processed.
There are also best practice considerations that apply to the register as a whole:
• The payroll register should be a report that can be run again as needed, rather than being a one-time-only outcome of gross-to-net processing.
• Filters should be available to limit the payroll register to a range of employees, business units or divisions or to include a range of pay periods or both.
• The payroll register should be available as a PDF file, so it can be used online without printing on paper. An electronic payroll register eases the key size constraint on how much information can be given for each separate gross-to-net calculation.
• The payroll register headers and footers should clearly identify the pay period, the date and time when run, the current page number and count and the current business unit or division.
The final best practice relates to YTD totals. Some payroll registers, that supply YTDs at the employee level, only include in a payroll register employees with current transactions in that pay period. In other words, an employee may have had prior earnings, but now be on unpaid leave. If such persons are left out of any subsequent payroll register, then one of two things result. Either the YTD totals shown on the payroll register include amounts for such employees or they don’t.
If the YTDs do include values for such employees, then these YTDs don’t “add down.” In other words, the YTD report totals for the payroll register aren’t the sum of the individual YTDs in the register body. In this case it becomes very difficult to ensure the YTDs shown on the report are the right amount, since you can’t just verify this by adding up individual employee amounts.
If the YTDs don’t include values for such employees, then it becomes difficult to use the payroll register to track changes between pay periods, since you can’t expect to take the prior period YTDs, add the current payroll results and get the YTD values shown on the current register.
This won’t work where employees were paid in the prior period, but not in the current period. In this situation, the vendor has to supply an option to produce a register that includes employees whether or not they have current pay period results. Otherwise, it becomes impossible to use the payroll register to balance payroll at year-end.
Alan McEwen is a Vancouver Island-based HRIS/Payroll consultant and freelance writer with over 20 years' experience in all aspects of the industry. He can be reached at firstname.lastname@example.org, (250) 228-5280 or visit www.alanrmcewen.com for more information.