Payroll Accounting

The Payroll Accounting Solutions employed within a company have a significant impact upon the corporate accounts as well as providing primary information into the Standard Business Reporting (SBR) needs of the company to government. 

Too often when we install Muli's payroll accounting solution, we find new clients with balance sheets prepared on a tax basis that exclude employee obligations giving business owners a false sense of prosperity!

The Muli payroll procedures ensure that all cost obligations derived from leave, superannuation payments and long service (both in-house or through 3rd party providers) are correctly accounted for in the corporate accounts. Muli does this in two ways:

1. Fully loading costs to projects
2. Ensuring realistic provisions for long service leave 

To achieve fully loaded costs, Muli extends the employee timesheet after the “real pay” and includes values for all the provisions (superannuation and leaves). These are then taken into account in calculating the total hourly cost of that employee. It is this figure that is then charged as the fully loaded cost to the labour orders (i.e. cost allocations within the projects).

To make realistic provisions for long service leave, Muli  provides the Payroll Manager with a method to apply actuarial provisions. The calculation of the provision is obtained by taking the obligation hours times an average cost per hour – using pays spread over a period of between one and three months. Muli then applies a discount factor for employees in their early years with the company as they are less likely to be around in the future and make a claim on long service benefits.

It should also be remembered that a new employee may commence work as an apprentice  but by the time he takes his long service leave he is a foreman - and you have to pay him as a foreman. But you originally made the obligation when he was an apprentice, on a much reduced rate of pay. So payroll accounting should involve continually upgrading these provisions when the probability of payment is higher and requires actuarial adjustments. This is especially relevant when employees are maturing and have a greater probability of accessing their long service leave.

Another related issue in payroll accounting is severance pay. Over time businesses may find the need to restructure, and if a company is thinking that they may have to shut down substantial parts of their business then they would need to calculate what their severance pay obligations are.

Muli assists the process by providing special leave fields so the obligations can be included in the payroll accounting.

WHERE TO NEXT ?  Select MODULES from the top menu and examine PAYROLL SOLUTIONS for a greater understanding of Muli's Payroll Accounting.