Payroll
Records of attendance
Clock Card
A clock card for each employee is placed in a rack by a time recorder clock. The employee
inserts his/her care into the time recorder on arrival at work where the time is recorded. A
similar pattern is followed when the employee leaves the factory. Clock cards are then used
to calculate the hours worked by each employee
Example of a partially completed clock care
XYZ Ltd Clock card
Name of employee ……………………………………. Week ending …………………………
Day In Out In Out Total hours
Monday 0800 1200 1300 1830 9.50
Tuesday 0800 1200 1300 1800 9.00
Wednesday
Thursday
Friday
Time Sheet
A time sheet is usually completed by employees who work away from the employer’s
premises. It shows the hours worked each day and possibly the job number or the name and
address of the customer. Sometimes there is a space for recording travelling time. In some
businesses the time sheets are signed by the supervisor before being passed to the wages
department.
Example of a partly completed time sheet
XYZ Ltd Time sheet
Name of employee …………………………….. Week ending …………………………
Day Job Total hours
Monday Mr Smith 4 The Crescent Anytown Garden wall repairs 3 hours
AD Ltd 12 Highstreet Weston Roof repairs 4.5 hours
Tuesday
Wednesday
Thursday
Friday
Methods used to calculate pay
There are several methods used to calculate the gross pay received by employees. Every
employee should have a contract of employment which will include details of his/her pay.
Time basis
The employee is paid an agreed amount for each hour worked (often up to a set number of
hours each week). The standard rate per hour is known a basic rate. Sometimes employees
are paid a higher rate of pay for any time worked above what is regarded as normal for the
working week. These additional hours are known as overtime.
Piece rate basis
The employee is paid an agreed amount for each article produced or each task performed.
Sometimes employers pay a minimum wage regardless of the quantity produced.
Salary
The employee is paid an agreed annual amount (usually in monthly). Sometimes overtime
may be paid if extra hours are worked.
Deductions from gross pay
Gross pay is the total amount earned by an employee. Certain deductions will be made to
arrive at the net pay (take-home pay).
Statutory deductions
These are deductions required by law and consist of:
Income tax
Social security/national insurance contributions
The employer forwards these amounts to the appropriate government departments.
Voluntary deductions
These are deductions which an employee chooses to have deducted from his/her gross pay.
They may include:
Contribution to a pension fund
Subscription to a trade union
Subscription to a social club
Donations to charity
The employer forwards these amounts to the appropriate organisation.
Payslip
All employees should receive a payslip from their employer. This shows gross pay, statutory
deductions, voluntary deductions for the period (week or month) and also cumulative (total)
figures from the beginning of the tax year.
Example of a payslip
XYZ Ltd Pay advice
Name of employee ……………………………… Week ending ……………………………
Tax Code number …………… Tax period – Week number ……….
Amount Amount
$ $
Basic wage 230
Overtime 50 ____
Total gross pay 280 1450
Income tax 52 260
National insurance 23 110
Pension contribution 10 50
Trade union subscription 3 15
Total deductions 88 435
Total net pay 192 1015
Payroll
In addition to preparing a detailed payslip for each employee a payroll register or wages sheet is prepared. This is a list showing the total gross pay,
deductions and net pay for each employee.
Example of a partly completed payroll
XYZ Ltd
Payroll
Week ending ………………………….. Tax period – Week number ………..
Earnings Deductions Net pay
Name of Basic pay Overtime Total gross Income tax National Pension Trade Total
employee pay insurance contribution union sub deductions
$ $ $ $ $ $ $ $ $
Abdul Aziz 230 50 280 52 23 10 3 88 192
……………….
……………….
Etc
Totals
Bookkeeping entries
The payroll register is used to make entries into the books of account. Basically an account is
required for wages and for each of the main types of statutory and voluntary deductions.
Main entries –
Debit Wages with the actual amount paid to employees
Credit Cash book
Debit Wages with the total amount of each deduction
Credit Income tax
National insurance
Pension fund
Trade union subscriptions
(and any other account as required)
Debit Income tax with the total amount paid for each of these
National insurance (usually monthly or three monthly)
Pension fund
Trade union subscriptions
(and any other account as required)
Credit Cash book
Examination Questions
Jun 2012 Paper 21 Question 2(c)/(d)
June 2011 Paper 21 Question 2 (d)
June 2010 Paper 21 Question 3(d)
June 2010 Paper 23 Question 2 (b) – (c)
Specimen Paper 2 Question 3(d)
November 2009 Paper 2 Question 2(f) – (g)
June 2009 Paper 2 Question 3 (a) – (b)
November 2008 Paper 2 Question 2(c)
