When was your business’ last payroll audit? Here’s why your company needs one

Payroll Audit

Payroll audits are serious business – and your business might be in serious trouble if you fail to have one done.

A payroll audit is performed to ensure that everything about your payroll system is in working order. It ensures that there are no anomalies, no errors, and no outdated practices, among other things.

But when you fail to get this done on a regular basis, you expose your company to the risk of an external audit – one of a company’s worst nightmares come true.

In this article, you will find out:

  1. What exactly is a payroll audit
  2. What a payroll audit does
  3. How often you should do a payroll audit
  4. What risks are associated with not having a payroll audit
  5. Ways to ensure that your payroll is in capable hands

What’s a payroll audit?

The main goals of a payroll audit are to:

1.      Check the accuracy of your payroll system & ensure compliance

Are your payroll processes in line with what is expected in the country you are operating in? Did your company pay workers wages according to local labor law, their contract specifications, and your company policies? If yes, did your company withhold the correct amount of tax, and pay it to the right authorities on time?

A payroll audit will check all of this information, helping your company achieve 100% compliance with local legislation.

2.      Identify issues with your payroll system

Was a wrong value input, and as a result, is creating erroneous data? Is your current system not properly calculating leaves for part-time employees? Or is it not accounting for some bank holidays? A payroll audit helps identify any systematic issues your payroll process may have.

3.      Create an audit report and implement recommendations

After the initial audit, payroll auditors will provide you with an audit report detailing any errors, recommendations, and adjustments deemed necessary to put your payroll system back on track.

How often should you do a payroll audit?

Payroll audits should be done every year to make sure that your system is running smoothly.

What can happen if you don’t get a payroll audit done?

Companies that don’t have their payroll processes audited regularly (i.e. at least once each year) expose themselves to the risk of an external audit… By this time, any irregularities that are found will be sanctioned, and the company will have to endure a long and costly legal battle. As a result, the company’s reputation will also be dragged through the mud.

What does a payroll audit do?

Concretely, auditors will do the following and more when performing a payroll audit:

1.      Compliance checks

This includes checking whether your application of the labor law, whether local, state, or federal tallies with the legislative requirements.

2.      Accuracy of records check

Are the hours worked and overtime hours that were input in your payroll system correct for employees? Were their leave entitlement and other compensatory benefits respected?

3.      Employee classification check

Payroll auditors will also go through your list of independent contractors to make sure that they are not, in fact, eligible to be employees instead. To do that, auditors will take a look at whether these contractors have to work where and when you say so, using the tools you provide, among other things. If they determine that any of your independent contractors are, in fact, acting as employees, they will make recommendations to convert these contracts into legally recognized employees.

4.      Error & fraud detection

Payroll fraud is a real risk – one which payroll audits can help detect early on. A payroll audit can detect frauds like ghost employees. A “ghost employee” is an individual who is added to your payroll to receive income even if they aren’t actually employed by your business. It might be someone who has passed away and isn’t accidentally removed from your payroll, but usually, it’s someone who was included deliberately.

5.      Record-keeping check

Payroll audits evaluate accuracy of payroll data and documents. After all, maintaining accurate records is necessary for tax organizations’ audits and may prove important in court later on. Different countries have different policies when it comes to record keeping. In Nigeria for instance, companies are required  to keep employee records for 3 years.

6.      Benefits Management check

Payroll audits are a useful tool for employers who offer benefits to their staff members. Auditors may verify that benefits are being paid out correctly and that the business is fulfilling its responsibilities regarding pensions, medical care, and other perks. This helps prevent employee dissatisfaction and

7.      Risk management check

Performing routine payroll audits is a preventive method of risk control. By detecting and resolving problems early on, auditors reduce the possibility of negative legal and financial repercussions further along the way.

8.      Process improvement check

Is your payroll system operating well, but not optimally? During the auditing procedure, businesses can improve your payroll process by making adjustments, once improvement opportunities have been identified.

What makes a payroll audit difficult?

1.      Changes in labor law

Payroll regulations and legislation do not always stay the same. Take for instance, the minimum salary requirements: they are constantly changing to catch up with the rising cost of living and cultural as well as labor trends.

2.      Decentralized payroll systems

Do you record employee attendance on one program, and calculate employee benefits using another? When you use several applications and programs to manage your payroll system, you create opportunities for errors to happen.

The solution to this kind of problem is to use a digital, centralized payroll system which unifies data entry, data collection and data storage for a more optimal payroll experience.

This is where Africa HR Solutions comes in. With our centralized payroll system that offers an employee self-service portal among many other perks, there is little risk of data getting lost or corrupted somewhere along the way.

How to ensure that your payroll is in capable hands?

Place your trust in a well-known and recommended payroll provider. Trusted by over 400 changemakers in Africa, Africa HR Solutions offers digital payroll and payroll audit services to help keep payroll trouble at bay.

Want to learn more about how we can help you? Get in touch with our team here!

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GRANT GERAGHTY - Africa HR Team

GRANT GERAGHTY

HEAD OF CLIENT RELATIONSHIP

Grant Geraghty is the longest-serving member of the Africa HR team. This resident subject matter expert and client champion is responsible for gaining a deep understanding of our clients’ unique HR needs in Africa and providing tailored solutions that align with their business objectives. Grant collaborates closely with our clients to ensure that their requirements are properly implemented, providing ongoing support and guidance throughout the process.

Grant brings a wealth of experience to his role, having served as Africa HR’s longest-serving employee. He holds a Bachelor of Commerce degree, with a major in Economics and Business Finance, from the University of Natal in South Africa. Additionally, he has completed a certification program in Payroll and Tax Administration from the University of Cape Town, further enhancing his expertise in HR operations and compliance.

His commitment to delivering exceptional service and his extensive knowledge of HR in Africa make him an invaluable member of the Africa HR team.

KEVINA TAKOORDYAL Africa HR Team

KEVINA TAKOORDYAL

HEAD OF OPERATIONS

Kevina Takoordyal has a BA Hons Business Management from the University of Glamorgan, UK, with MBA in leadership and Innovation, MBA General, PMP Certified, and Agile Scrum Master. She currently works as the Head of Operations at Africa HR Solutions Ltd with more than 20 years of proven leadership capabilities in Operations, Business Development, People Management, Process Optimization, and Project Management in the Financial Services, BPO, Banking Industry, and Heath Care Industry. In Senior leadership roles with an international footprint across Europe working and extensive Pan- African experience from a compliance, finance, and operations angle, Kevina comes across with a panoply of cross-functional skills. Kevina also serves on a few Boards, Non-Independent Executive at MioD and for NGOs on a voluntary basis, a coach and mentor to aspiring female leaders across Africa and Mauritius.

Kevina is a firm believer in Servant Leadership with a strong focus and commitment to uplifting others, with the ability to deliver through a highly engaged – diverse team, and works towards consistently synergistic value creation. While being a focused and adaptive thinker and Kevina is actively participating in panel discussions on Innovation, CX, Digital transformation.

Kevina serves as Project Assessor for the National Youth upskilling program. She has been recognized as Global Talent in a few companies, Ceridian, and International SOS Ltd whereby she has been awarded a few scholarships and had the opportunity to be mentored by Senior Vice President in the US. Award Winner in various fields and at a national level and recognized including Super Achiever Leader Award in Africa in 2016, Awarded Africa Women Leader 2018.

VILOSHNA PACKIRY POULLE​

VILOSHNA PACKIRY POULLE

Head of Finance & Business Support

Viloshna is an experienced finance professional with 18 years of expertise in strategic financial planning, financial analysis, cash flow management, systems and controls implementation, financial reporting, and continuous process improvements. She currently serves as Head of Finance & Business Support, where she has successfully automated and leveraged the financial reporting system capabilities to ensure efficient company operations.

Viloshna’s background includes senior roles in a multinational pharmaceutical company and a large listed Mauritian conglomerate. Her meticulous attention to detail and strategic thinking have streamlined financial processes, making her a valuable addition to any finance team. Viloshna is a qualified finance professional with an FCCA qualification and an MBA, bringing valuable expertise to any organization.

In her current role, Viloshna leads the company’s Treasury and Payments function, including the fulfillment of the company’s cross-border payments into Africa. With her strong educational background and extensive experience, Viloshna consistently demonstrates her ability to optimize financial operations, minimize risks, and improve profitability. Her expertise in financial reporting and process improvements make her a valuable asset to any organization.

MARK DU PREEZ​

MARK DU PREEZ

Head of Legal & Compliance

A qualified lawyer who joined Africa HR Solutions in July 2020, Mark Du Preez has experience working in private practice for a reputable law firm in South Africa. He also played commercially focused roles at a leading private bank, wealth management company, and outsourcing firm in South Africa and Mauritius.

Mark has played a pivotal role in Africa HR Solution’s risk mitigation strategy, which positively impacted P&L performance over the years.

He currently leads the Partnerships function of the company including relationships and oversight with in-country partners (ICPs) across Africa.

Alex Daruty - Africa HR Team

ALEX DARUTY

Head of Commercial

Alex has more than 15 years of experience in the global, strategic development of both enterprise and consumer brands in categories including technology, transport, enterprise software, entertainment, and travel.

With experience in roles on both agency and corporate side, he has worked across international brands and has led the development and execution of multi-discipline campaigns across EMEA, NORAM and Asia Pacific.

His focus is on driving meaningful business impact through brand differentiation and building high-functioning, digitally oriented, and analytically driven capabilities. He is motivated by working with, and developing dynamic people, teams, and organizations.

He leads, manages, develops and mentors the Key Account Management department, including line management responsibility for the team of Key Account Managers and Key Account Administrator who represent the Company as the primary communication link between all relevant stakeholders, including clients, third party in-country partners and internal functions.

Originally from Mauritius, he holds bachelor’s degrees in International Business, Finance and Management from the University of Nevada, Reno.