Payroll
Payroll goes wrong in two ways: late or incorrect payment, which damages trust with staff immediately, and incorrect statutory treatment, which surfaces later as penalties and interest. Confidentiality is the third reason organisations outsource it. In a small finance team, whoever processes payroll knows what everybody earns, and that is frequently reason enough to move it.
1
Input
Changes captured and approved
2
Process
Calculate and validate
3
Approve
Review before payment
4
Pay
Files and payslips
5
Submit
Statutory returns
How the Payroll Runs
01
Input and Change Control
Every change is captured against an authorisation. Pay changes made on a verbal instruction are the most common source of both error and fraud, and requiring approval removes most of that exposure.
- Change requests captured against written authorisation
- New engagements and terminations processed with documentation
- Leave, overtime and allowance input validated
- Cut off dates agreed and applied consistently
02
Processing and Validation
Calculation against current tax tables, then validation before anything is paid. A comparison against the prior month catches the errors that a calculation check never will.
- Processed against current tax tables and thresholds
- Month on month variance report reviewed
- Statutory minimums and bargaining council rates applied
- Exception report on unusual values before approval
03
Approval
Nobody should process and approve their own payroll run. We produce the run and a named person on your side approves it before payment, which preserves the separation of duties.
- Payroll run submitted for client approval
- Variance summary provided with the run
- Named approver on your side confirms release
- Approval evidence retained for audit
04
Payment and Payslips
Bank files prepared for upload rather than payments made on your behalf, unless you specifically arrange otherwise. Payslips are distributed securely, since a payslip sent to the wrong address is a POPIA incident.
- Bank payment file prepared for your authorisation
- Payslips distributed securely to employees
- Third party payments scheduled, such as garnishees
- Payroll journal posted to the general ledger
05
Statutory Submissions
Monthly declarations and the bi annual reconciliations, filed on time. SARS applies payroll penalties automatically, so late submission costs money without anyone deciding to impose it.
- Monthly EMP201 declarations submitted
- Bi annual EMP501 reconciliations
- IRP5 and IT3a certificates issued to employees
- UIF declarations and Compensation Fund returns
What You Receive
- Monthly payroll processed and validated before approval
- Variance report accompanying each run for review
- Bank payment file prepared for your authorisation
- Payslips distributed securely to employees
- Monthly EMP201 and bi annual EMP501 submissions
- IRP5 and IT3a certificates issued to employees
Indicative Timeline
Takeover is best timed to a tax year or at minimum a month end, because mid period migration means reconciling year to date figures across two systems. Allow three to four weeks including a parallel run.
- Data migration and setup: one to two weeks
- Parallel run against your current payroll: one cycle
- Verification of year to date figures: within the parallel run
- Live from the following month
What Payroll Covers
A full monthly cycle including the statutory obligations that attach to employing people.
Processing
Monthly calculation, validation and payslip production against current tax tables.
PAYE and UIF
Monthly EMP201 declarations and payment schedules submitted on time.
EMP501
Bi annual reconciliation, the submission that most commonly exposes errors made during the year.
Fringe Benefits
Company cars, medical aid, allowances and loans treated correctly rather than by habit.
Leave Administration
Balances tracked and provided, which becomes a liability calculation at year end.
Confidentiality
Remuneration data held outside the organisation, frequently the main reason for outsourcing.
Frequently Asked Questions
Do you make the payments to staff?
Normally we prepare the bank file and you authorise and release it, which keeps payment authority with you. We can operate differently by arrangement, but most clients prefer to retain that control.
How do you keep salaries confidential?
Data is held outside your organisation and access is restricted to the assigned team. For many smaller clients this is the primary reason for outsourcing, because in a three person finance team confidentiality is structurally impossible.
When can we switch providers?
Ideally at the start of a tax year, or at minimum a month end. Mid period migration requires reconciling year to date figures across two systems, which is doable but adds cost and risk for no benefit.
What if SARS raises a query?
We respond and deal with the correspondence. Where the query relates to a period before we took over we will still assist, though reconstructing another provider work is quoted separately.
Do you handle bargaining council requirements?
Where your industry falls under a council, yes, including the prescribed rates, contributions and returns. Tell us at the outset, because council requirements materially affect setup.
What about leave provisions at year end?
Leave balances are tracked and provided monthly, so the year end provision is a calculation from existing data rather than a reconstruction. Auditors routinely test this and it is a common source of adjustment.
Related Services
This sits inside our Financial and Management Accounting practice. Related work: Taxation for employees tax and the wider SARS position, and Monthly Accounting and Reporting where payroll posts into the same cycle.
