Attendance and Payroll Procedures
Chapter Eighteen
Syllabus topic 6, "Attendance and payroll procedures, Overview of statutory requirements of Idle time and Overtime Incentives"
Pages 48 to 50 of 82
In one line
Time keeping records that a worker was present; time booking records what he did while he was there; and the difference between the two is idle time.
Time keeping: recording attendance
Purpose. To know who was present and for how long, so that wages can be calculated, attendance-linked benefits given, and the discipline of the factory maintained.
Methods, from oldest to most usual:
| Method | How it works | Weakness |
|---|---|---|
| Attendance register | A clerk records arrival and departure | Slow; open to obliging a friend |
| Metal disc or token | Each worker moves his numbered disc from one board to another on arrival | Cheap; a worker can move another's disc |
| Time recording clock | A card is punched on arrival and departure | Reliable on time; still open to punching another's card |
| Card or biometric reader | An identity card is swiped, or a fingerprint or face read | Removes the substitution problem |
The weakness column matters more than the list. Every method up to biometric identification is defeated by one worker answering for another, and that is the control problem time keeping exists to solve.
Time booking: recording what the time was spent on
Purpose. To charge the right job with the right hours, so that the cost per job is right and idle time is visible.
Documents:
| Document | What it records |
|---|---|
| Daily time sheet | Each worker's day, split across jobs |
| Weekly time sheet | The same, for a week; fewer forms, less accurate |
| Job card or job ticket | The time spent on one job, often by several workers |
| Piece work card | The quantity produced rather than the time |
| Idle time card | Time not booked to any job, and its reason |
The job card follows the job; the time sheet follows the worker. Both exist because a cost accountant needs to look at it from both ends.
Why both records are needed
Time keeping gives the hours to be PAID for. Time booking gives the hours to be CHARGED to jobs. They should agree, and where they do not, the difference is idle time and must be explained.
| Time keeping | Time booking | |
|---|---|---|
| Records | Attendance - in and out | Utilisation - what was done |
| Kept by | The gate or time office | The foreman on the shop floor |
| Used for | Computing wages payable | Charging jobs and finding idle time |
| Unit | Hours present | Hours on each job |
The reconciliation of the two is the control, and it is the reason the next chapter exists: a worker paid for eight hours and booked to jobs for seven has an hour that somebody must account for.
Payroll procedure
The payroll, or wages sheet, is prepared from those two records and runs:
- gross wages - time or piece earnings, plus allowances, overtime and incentive earnings;
- less deductions - provident fund, employees' state insurance, professional tax, income-tax deducted at source, advances, fines;
- net wages payable;
- plus the employer's own contributions, which are a cost though not a payment to the worker;
- analysis of the total across jobs, departments and overhead, from the time booking records.
Attendance and Payroll Procedures
Step 5 is the cost accountant's step and the other four are the paymaster's. The same total is being looked at two ways: as money owed to people, and as cost belonging to jobs.
Separation of duties. The person who records attendance, the person who prepares the payroll and the person who pays should not be the same, or a name can be added to the roll and the wages collected.
Two things a payroll question turns on
Paid holidays, and a daily rate
A daily-rated worker is paid for the days the contract pays for, not the days he works. Where the question says Sundays are paid holidays, a month of thirty days is thirty paid days, not the twenty-six he attended.
Read the working week too. "Forty-eight hours a week over six days, or eight hours a day" tells you the week, and with paid Sundays it tells you that the seventh day is paid as well. Count the days of the month, not the days of work, and say in a working note which you have used.
A monthly-rated worker needs no such computation. His figure is the month's salary, whatever the days.
The employer deposits BOTH shares
Provident fund and state insurance each have two contributions, and they behave differently:
| The employee's share | The employer's share | |
|---|---|---|
| Where it comes from | Deducted from the worker's wages | Added by the employer |
| Effect on net wages payable | Reduces it | None |
| Effect on employee cost | None - it is inside gross wages already | Increases it |
| Who deposits it with the authority | The employer, along with his own share | The employer |
So a question asking "the total provident fund to be deposited by the employer" wants BOTH shares added together, while a question asking "the labour cost to the employer" wants the gross wages plus his share only. They are different numbers from the same data, and a student who has learnt one answer gives it to both.
What it does NOT mean
Time keeping is not time booking. One is attendance, the other utilisation.
Net wages are not employee cost. The employer's contributions are a cost, and deductions are not a saving.
A job card does not replace a time sheet. They record the same hours from different directions.
Quick revision
- Time keeping records attendance: register, disc or token, time recording clock, card or biometric reader; every method short of biometric is defeated by substitution.
- Time booking records utilisation: daily and weekly time sheets, job cards, piece work cards, idle time cards.
- Attendance hours less booked hours equals idle time, and reconciling the two is the control.
- Payroll: gross wages, less deductions, equals net wages payable; plus the employer's contributions; then analysed across jobs and overhead.
- Separate the recording, the preparing and the paying.
Attendance and Payroll Procedures
Test yourself
1. Distinguish time keeping from time booking. Time keeping records a worker's attendance - the hours he was present, used to compute wages payable; time booking records what he did while present - the hours charged to each job, used to cost the jobs and to reveal idle time.
2. What is the chief weakness of a time recording clock, and what removes it? That one worker can punch another's card; a card or biometric reader that identifies the person removes it.
3. What is the difference between attendance hours and booked hours? Idle time, which must be identified and explained.
4. Are net wages the employee cost? No. Employee cost is the employer's cost, so deductions do not reduce it and the employer's own contributions must be added.
Answer in one sentence
Describe the attendance and payroll procedure. Attendance is recorded by time keeping, through a register, token, time recording clock or biometric reader, and the use of that attendance is recorded by time booking through time sheets and job cards; the payroll is then built from gross wages less statutory and other deductions to give net wages payable, with the employer's contributions added to arrive at cost, and the total analysed across jobs and overhead from the time booking records, the difference between attendance and booked hours being idle time.
The rest of this subject
These notes are cut from the University's printed syllabus. Open the syllabus itself, or the past papers, for the same subject.