Internal checks – Wages – Maintenance of Wages Records, Preparation of Wage Sheet, Payment of Wages, Auditing


Internal checks- Wages

Wages are very important item of expenditure. The system of internal check for wages should be devised in a planned and careful manner. There are great possibilities of frauds in a concern employing a large number of Time workers. A sound system of internal check for payment of wages may avoid errors and frauds which may be revealed from time and piece wages records. The following system of internal check may be adopted as regards wages.

I. Maintenance of Wages Records

1. Time Records:

It is a record maintained by the gate keeper who records the entry time and exit time of each worker. Foremen of each department also maintain records for time spent by an employee. When wages are paid on the basis of time spent by a worker, the record maintained by the gate keeper and record maintained by foremen of each department are summarised for payment of wages.

2. Piece-work Records:

This record is maintained by the foremen who records the actual work done by each employee. Each person is provided a job card who records the work done by him. Finally, the record maintained by the foremen and job card are used in determining wages.

3. Overtime Records:

Overtime should be sanctioned in advance by a responsible person. Employees should be issued overtime slips bearing the name and number of worker. Such slips should be issued and initialled by some responsible official. At the end of the week such slips should be sent to the wage office.

4. Pass-out Records:

The workers should not be allowed to leave the factory without the written permission. For this, a passout slip is issued to the worker by same authority. Such slips are handed over to the gate keeper. The wage office should also be given copy of it.

II. Preparation of Wage Sheet:

The wage sheet should not be prepared by one clerk alone. A set of clerks should compare the records maintained at the gate and the wage office and enquire about differences, if any. The following points should be taken into account.

1. Base:

The wage sheets should be prepared with the help of attendance register, overtime slip and pass-out slip.

2. Separate Sheets:

Separate wage sheets should be used for time-workers and piece-workers.

3. Checking:

The wage sheet should be inspected and counter signed as correct by the works manager and foreman.

4. Signature:

The wage sheet should be counter signed by those employees who has prepared it.

5. Approval:

Each and every wage sheet should be approved by factory manager or managing director.

III. Payment of Wages:

1. The person who is in-charge for payment of wages should not have connection with the preparation of wages sheet.

2. Each worker should be asked to receive his wages personally in the presence of his foreman to identify him.

3. No payment is made to someone on behalf of a worker who is absent.

4. Wage payment should be made by cash department, not by other persons.

5. The amount of wages for each employee should be placed in an envelope bearing the name and number of person.

6. Special arrangements should be made for payment to the absentees.

7. Exact amount of money should be drawn from the bank for payment of wages.

8. Advances to workers should be discouraged and if it becomes unavoidable, they should be given through the petty cashier.

9. If casual workers are also employed in the factory a separate record should be maintained for them.

10. Undisbursed wages should be deposited immediately into the bank.

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