PAYROLL

Many businesses have employees who are paid by the business for the work they do. Most businesses will have a set day on which employees should be paid, and it is the payroll departments responsibility to ensure that wages are paid on the correct due dates. Weekly paid employees (wage earners) will be paid at least once a week, normally on the same day each week. Commonly the pay day will be either Thursday or Friday if the working week is from Monday to Friday.

Monthly paid employees (salary earners) will be paid once a month, and there will be a formula for determining the pay day. For example, this may be:

• the last day of the calendar month
• the last Thursday or Friday of the calendar month
• the same date each month, such as the 26th.

Employees may be paid their wages in several ways:

• in cash or by cheque
• by bank transfer
• through the Banks Automated Clearing System (BACS).

Making payments by these methods will be described in subsequent chapters. The payroll department also makes payments to outside agencies, such as tax and social services authorities and pension schemes.

ACTIVITY 2

1. Which of the following terms would be used to classify a payment for electricity to heat the business premises of a firm of plumbers?
   • A Expense
   • B Purchase
   • C Receipt
   • D Sales
2. Which of the following would be paid for by petty cash?
   • A Car repairs on the business owner's private vehicle
   • B Packet of envelopes at local store
   • C Paying a supplier for goods bought on credit
   • D Wages and salaries
3. Which of the following transactions are associated with payroll?
   • A Income from cash sale of computer used to calculate salaries
   • B Postage and stationery, office expenses
   • C Taxes on employee income, pension scheme payments, wages
   • D Credit purchase of safety equipment for delivery staff

For a suggested answer, see the 'Answers' section at the end of the book.