PAYROLL by ewghwehws

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									PAYROLL


          1
• Firstly who is the employee?




• Who is the employer?




                                 2
Preparing the payroll involves the following:

• Calculating the amount earned
  (wages/salaries) by employees

• Calculating deductions to be made from the
  pay of employees

• Calculating employer on costs such as
  employer national insurance contributions, and
  in some cases pension contributions

                                                3
       THE PAYROLL
• The payroll is a list of all employees
  giving details of the amount they
  earn, the amounts they are paid,
  deductions made from their pay, and
  contributions made by the employer.




                                           4
• Gross pay is the amount to which the
  employee is entitled BEFORE any
  statutory or voluntary deductions are
  made

• Gross pay can be earned in a variety of
  different ways. Please give as many
  examples as you can think of…….




                                            5
           NET PAY
• Net pay is gross pay less ALL
  deductions (statutory and voluntary)

• Net pay is often referred to as ‘take
  home pay’




                                          6
• There are two types of deductions that
  are made from our wages and salaries:




• STATUTORY AND VOLUNTARY




                                       7
• STATUTORY payments are deductions
  that employers are required to make BY
  LAW (statute) from the gross pay of
  employees. These are….

• Income Tax (Also known as PAYE – Pay
  As You Earn)
AND
• National Insurance Contributions (NICs)


                                        8
         INCOME TAX
• Wages and Salaries of all employees are liable to
  Income Tax (PAYE). This doesn’t mean that
  everyone will pay income tax because that would
  depend upon how much you earn and what personal
  tax allowance you have.

• Income Tax deducted from pay must be paid over
  periodically by the employer, on behalf of the
  employee, to HMRC




                                                      9
NATIONAL INSURANCE
CONTRIBUTIONS (NICs)

• These are also deducted by the employer
  from the pay of the employee in a similar
  way to Income Tax deductions. All
  contributions deducted are again sent to
  HMRC which collects them on behalf of
  the government Department for Work and
  Pensions (DWP)


                                              10
           VOLUNTARY
           DEDUCTIONS
Voluntary deductions are deductions made from pay at the
   employee’s request.

They include payments to:
• Pension Funds or Superannuation Schemes
• Charitable organisations
• Saving Schemes
• Trade Unions

• Voluntary deductions taken from the pay of the employee
  will be paid over on their behalf by the employer to the
  relevant collecting body



                                                             11
  EMPLOYER ONCOSTS
• These are costs incurred by the EMPLOYER

• Employers must pay national insurance contributions on your
  wages as well as the amount the employee pays

• Employers may also choose to pay into a pension scheme for
  their employees. Some employers may pay all of the pension
  fund contributions on behalf of the employee and some
  employers operate a scheme where the employee pays into
  the pension each month as well as the employer




                                                                12
Summary of the cost of
     Employment
• A true cost of employment to the
  employer consists of gross pay
  earned by employees plus any
  employer on costs




                                     13
   PAYROLL POSTINGS!
• Because there is no source document for the
  wages we will need to complete a journal with
  details of the payroll costs.

• We will then use the journal to make the postings
  to the double entry accounts.

• We use the journal for all transactions that will
  not go in one of the other books of prime entry




                                                      14
                          Journal
Date   Account name and             Ref   DR   CR
       narrative                          £    £




                                                    15
In the exam you will be required to
  make postings to the following
            accounts:


•   Wages Control account
•   Wages expense account
•   HM Revenue & Customs account
•   Pension Fund account
•   Voluntary deductions accounts


                                      16
• The Wages Control Account is a form
  of ‘total cost’ account

• All transactions which contribute to
  the cost of employment are
  processed through the control
  account




                                         17
• When wages are paid out of the bank we
  credit the bank account. The expense of the
  wages is a debit to the Wages Control
  Account

• The PAYE/NIC and Pension is a debit
  (expense) to the Wages Control Account and
  then you credit the liability to the HM
  Revenue & Customs Account and Pension Fund
  Account because YOU WILL OWE THIS
  MONEY TO HM REVENUE & CUSTOMS
  AND THE PENSION PROVIDER

                                                18

								
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