Overview of the Payroll System {HRM-2}

General Information

Overview of the Payroll System

• Salary-related details of employees, for instance: salary scales and notches, tax and bank details, bonus and increase dates, etc.
• User-maintained tables that are used for calculations, for instance: pension, medical aid and group insurance fund tables, general calculation tables and earnings and deductions
• The calculation phase, which is based on monthly pay cycles; several monthly calculations, and several pay dates within each calculation, are allowed
• Comprehensive reporting including: payslips, tax certificates, reconciliation, summary, posting-to-GL and statutory reports.

System Features

• Statutory requirements such as the calculation of personal income tax and the reconciliations required to produce tax certificates are handled by the system
• Up to twelve tax periods per year per person are catered for, taking full account of broken service periods;
• Tax certificates are automatically issued for these tax periods;
• Yearly updates of tax - and related tables are distributed to clients as patches.
• Statutory reporting to other government departments and agencies are catered for.
  
• An unlimited number of Earnings and Deductions {FPRG-6} may be defined by the administrator of the payroll system and used.
• A large number of Calculation Methods {FPRG-25} are available to be used in the creation of Earnings and Deductions.
  
• Some of the Calculation Methods use bits of the personal information information of employees already available in the system while others may, for example make use of Look-up Tables {FPRG-4} that can be maintained by the administrator of the payroll system.
• Facilities exist to indicate when (i.e. between which dates) the different elements will be effective.
  
• For groups of staff with similar compensation packages, the common Earnings and Deductions {FPRG-6} may be specified at a global level per Appointment Type {FPRG-7}.
• This eliminates the need to enter all Earnings / Deductions for a Personnel Member on individual basis and only exceptions need to be advised on individual level.
  
• The system handles payments to outside providers such as Pension-, Provident-, Group Life- or Medical Aid Funds, the Earning/Deduction set-up can be specified at global level
• Whether the Earnings / Deductions are included for an individual personnel members can be determined from Pension Detail {PAOP-4} or Medical Aid / Group Life Detail {PAOP-5}
• Amounts are determined from a combination of personal detail and values from Look-up Tables.
• Bond repayments can be done via electronic transfer or bank list.
• Multiple Pay Runs are handled through the Payroll Calculation Number - Refer to Fixed Individual Salary detail {FPRI-1}
• Multiple Pay Frequencies are handled.
• A rollback facility, which allows for re-calculation for all personnel or only selected individuals; (Refer to Full Calculation Rollback {FPRN-22}, Single Calculation Rollback {FPRN-23} and Bulk Late Rollbacks and Calculations {FPRN-29}).
• A powerful Pro Forma Payslip {FPRI-25}, which simplifies the handling of queries and advance payments.
  
• A "what-if" facility, aimed to assist the Payroll Section to give advice to individual staff members in respect of the salary components in structured salary packages. (Refer to Maintain Individual Package {FPRI-9} )
• Facilities for Automated General Salary Increases {FPRY-28} as well as a Back-Pay Calculation {FPRU-6} are available.
• Multiple Salary Notch Scale Ranges may be defined and functionality to apply Automatic Increases {FPRN-1} within the Scale Ranges is available.
• Salary Payments can be done via electronic transfer, bank list, cheque or cash; coinage lists are provided;
• Any number of Pay Points {FPRC-3} can be defined, and Payslips can be sorted within payment method by pay point; pay distribution lists are provided per pay point;
• A facility to Split Salary Costs {FPRI-11}, in the case where components of a personnel member's salary is funded from different Cost Centres {FCSO-1}
  
• Posting of transactions to the ITS General Ledger {FRM-28} is automatic.
• Extensive reporting for management information, trouble shooting, reconciliation with the ITS Integrator General Ledger, reconciliation of tax certificates, et cetera is available.
• The administrator of the payroll system is allowed to tightly control the different payroll events and processes through the Run Cycle Control File {FPRM-2}.
  

• For personnel contracted on a "Pay by Claim" - basis, functionality exist to control that claims do not exceed the total contract value. Refer to the "Overview of Claims against Secondary Appointment Contracts" {FPRI-27}.

• When the ITS Integrator Leave System {PMAIN-3} is fully functional, the following becomes available.
  
• Calculation of Leave Provision
• Functionality to include Leave Sold (Encashed) in Payroll Calculations

• When the system is used together with the ITS Integrator Personnel iEnabler, the following on-line electronic processes, with flexible set-ups for approvals becomes available
  
• Submission of Salary Claims against Secondary Appointments {P00003-6}
  
• Overtime Work Agreements and Overtime Claims {P00003-7}
  

• A Salary Budgeting System {HRM-3}, that has capability to use existing Personnel- and Payroll System information to project salary expense figures for a specified period is available.
  

Linking with other ITS Integrator Subsystems

Financial Code Structure Sub-system {FRM-27}

1. The debits and credits generated by the Payroll System are posted to specific General Ledger Allocations (GLA's) {FCSO-6}.
   
   • The GLA's are also used for validation purposes and to generate a transaction file for the General Ledger (GL). 
     
   • These GLA's must be created before Posts {PACS-4} can be created in the Personnel System and before Earning/Deduction Types {FPRG-6} can be defined.
2. The institutional bank account for salary payments, as well as the information required for producing the payment file for the bank, must be entered in the Cash Book Definition {FCSC-5}, for Sub-system “PR”.
3. The program to "Post Transactions to Ledger" {FGLO-28} / {FGLP-5} will post all salary transactions that have not yet been posted, as well as reverse rolled-back transactions, which had already been posted before rollback.
   
• The posting process will terminate if there are any Accounts Receivable (AR) transactions (staff loans) that were copied to the Payroll System, which have not been copied back to the AR System, when a final posting is done.
  
• The posting program will generate a listing containing the Personnel Number, Payroll Cycle, Sequence Number, Debtor Number, Loan Code and Reference of all AR transactions not copied back.
  
• This process (Copy Staff Loan Deductions to AR {FARS-7}) must first be run before the final posting is done. 
  
4. The program Generate Payments {FPRN-5}, will also generate a number of GL and Cash Book transactions for the five events, which have a bearing on salary calculations.

Student Accounts {FRM-21}

Account Receivable, Staff Loans Subsystem {FARO-8}

Personnel Appointments System {PMAIN-2}

• Code Structures
• Appointment Types  {FPRG-10} / {PACS-1} / {FPRG-7}
  
• Since compensation packages can be defined at a global level per Appointment Type, careful definition of these Types can result in a dramatic reduction of the amount of detail that has to be specified at individual employee level in the Payroll System, thereby reducing the maintenance effort significantly.
• Ranks {PACS-2}
  
• In the Payroll System, the Salary Scale of an employee is linked to the Rank at which he / she is actually appointed. 
  
• The user defines the relevant scale for each rank, which then default to an employee who is appointed at the “Authorised Rank” for his / her post. 
  
• When new salary scales are implemented, the correct new scale will automatically be assigned to all such employees.
• Upon creation of a new rank, the system will default the built-in scale 9999 with zero financial values to this rank, since each rank must be linked to a scale.  The next logical step, before an employee can be appointed to this rank, would then be to link the correct scale to the rank.
• Posts {PACS-4}
• In the Higher- and Further Education environment, the Council of the Institution normally approves a post at a certain level of seniority (which is linked to an authorised rank) and at a certain salary scale. 
  
• In practice, however, the rank of an employee may differ from the authorised rank, e.g. the authorised rank for a vacant post is “Professor”, but the person is appointed to this post at the rank (and hence the salary) of “Senior Lecturer”.  Other examples would be two junior people sharing a senior post, an employee on a personal (ad hominem) scale, etc. 
  
• In such cases, salary scales must obviously be assigned individually, and will remain effective for these employees until individually changed again.
  
• Refer to the Overview of the Personnel Appointments System {PMAIN-2} for more detail.
  

• Personnel Appointments System

• Salary-Related Information

• Salary Notch, Barrier Notch
• Increase Month, First Increase Cycle
• Payment Method, Bank Account Type
• Bank Account No., Bank Branch Code and Name
• Spouse's Names
• Bonus Month, Calculation Number, Pay-date
• Receiver of Revenue Code
• Preferred Language
• Income Tax Number
• Marital Status for Tax Purposes
• Is Bonus Taxed Monthly or Annually?
• Pay Point
• Stop Payment Indicator with Start and End Pay Cycles.

• Reports in the Personnel System that may be of use to the personnel in the Payroll Section
• Personnel List {PBOPR1-3}
  
• Personnel Control List{PBOPR1-4}
  
• List of Personnel per Department {PAOPR2-2}
  
• Personnel per Appointment Type {PAOPR2-1}
  
• Work-Related Report {PAOPR2-5}
• Fund Membership Report {PAOPR1-1}     
• Personnel to be Pensioned {PAOPR1-2}
• Appointment Types List {PACSR1-1}
  
• Ranks List {PACSR1-2}
• Posts List {PACSR1-3}
  
• Posts with Expiry Dates {PACSR2-1}
  

Implementation Sequence

• The following pre-requisite information must exist:
  
• The appropriate General Ledger Allocations {FCSO-6}
• The Transaction Types {FCSO-7} for the following Events
• RA - ACB Payments
• RB - BDB Payments
• RC - Cash Payments
• RD - Bank Transfers
• RQ - Cheque Payments
• RS - Salary Calculation
  
• The definition of the Bank Account {FCSC-5} used for salary payments.
  
• Salary Scales {FPRG-1}, as well as Ranks linked to Salary Scales {FPRG-2}
• Personnel records created and maintained by the Personnel Section, with the (possible) exception of the salary-related detail, as discussed previously. Refer to Personnel Appointments {PMAIN-2} for more detail.

• Set-ups
• To be done in the sequence indicated below.
  

1. Define Funds {FPRG-3}  (Pension, Provident, Retirement Annuity, Medical Aid, Group Insurance and Other Funds)
2. Enter Institution specific details {FPRM-1} (For example Institution Tax Number, UIF Registration Number, Contact Person, Start of Tax Year, Sort Sequence for Salary Reports and Cash Rounding Details)
3. Supply ACB Tape Transfer Details{FCSC-5}
4. Default Bonus Months and Pro Rata Indicator{FPRM-5} 
5. Set up Access Control per Appointment Type{FPRM-6} 
6. Define Banks and Branches for Employees{FPRC-1}  
7. Supply Receiver of Revenue Detail {FPRC-2}  l
8. Define Pay Points{FPRC-3} 
9. Define Lookup Table Types {FPRG-3}   (For example for Pension, Medical Aid, Group Insurance, Non-RSA PAYE)
10. Enter the Lookup Table Detail{FPRG-5} 
11. Define Earning / Deduction Types{FPRG-6} 
12. Set up Global Earnings / Deductions {FPRG-7} per Appointment Type {PACS-1}
13. Enter Individual Salary Scales {FPRI-3} where applicable.
14. Complete the Fixed Salary Detail for Employees {FPRI-1}.
15. Advise Individual Earning / Deduction Detail {FPRI-2} for staff members where applicable.
16. For third party payments, "Maintain ACB Tape Credits" {FPRI-2} for individual staff members.

• The bulk of the routine maintenance load in the Payroll System would obviously lie with items 14 through 16. 
  
• Item 6 would be updated if a new employee has an account with a bank and / or branch that is not yet on the system, or if an employee changes from one bank to another.
  
• Item 10 would require action only when the rules of a Scheme change.
  
• Item 13 would have to be done when a new set of salary scales is implemented.

Use of computerised payroll systems in the RSA

Handling of Medical Aid contributions for Pensioners

• Depending on management's requirements, a separate Cost Centre {FCSO-1} can be created for the expenses paid to ex-employees.  Alternatively the cost centre of the department in which the person had previously worked could be used.  (The latter choice is not recommended, since that department will, in reality, not incur these costs).
• Create the appropriate Ledger Account(s) {FCSO-3}, linked to Account Category 324 = “Compensation: Unclassified”
  
• Create the appropriate General Ledger Allocation(s) {FCSO-6}.

• Create separate Appointment Types {PACS-1} for the pensioners via menu option and set the Payroll Appointment Type Rules {FPRG-10} “TYPE” = “T”:  “FTE” = “0”:   “Pay by Claim” = “C”. 
  
• When "Calculate FTE Values" {PSOP-3}, is executed, the system will set the FTE-values for these people to zero.
• Users are also advised to create special Ranks {PACS-2} for the pensioners with “Subsidy Unit” = “2” and the “Rank Stats Level” {PAMT-6} indicated as "Non-Academic”
• Create special Posts {PACS-4} for the pensioners, using the appropriate GLAs.
• Create a special Leave Package {PLCS-1}, “No Leave Applicable”.
• Resign the person in the normal manner on his / her last day of service - refer to Service Records {PBOP-2}.
• Re-appoint the person with a "Tax Break" using above post, rank, appointment type and leave package, and Stats Category "8 - Excluded from Personnel Stats”.  Note that persons linked to category 8 will be excluded from Stats reporting.

• Define special Earnings {FPRG-6}.
• The various contributions must be advised at for individual pensioners through Individual Earnings/Deductions {FPRI-2}.
• Global Earnings / Deductions {FPRG-7} must be created for these Appointment Types to contra the Individual Earnings to the correct control GLA's; an appropriate Calculation Method is “6 -Percentage of Transaction”.
• The pensioners will then receive nil payslips, but their contributions will appear correctly on the appropriate Earning / Deduction Detail Reports and will be posted as usual to the General Ledger.