Occupati

onalSt
andar
d:Account
sandBudgetSuppor
tLev
elI
II
Uni
tTitl
e Pr
ocessPayr
oll
Uni
tCode EI
SACB3110812
Uni
tDescr
ipt
or Thisuni
tdescribestheperf
ormanceoutcomes,skil
l
sandknowledge
requi
redt
opr ocesspayrol
lfrom pr
ovi
deddatausingmanualand
computeri
sedpay rol
lsy
stems.

El
ement
s Per
for
manceCr
it
eri
a
1.Recordpay
rol
l
data
1.
1Payroll
dataischeckedanddi
scr
epanci
esar
ecl
ari
fi
edwi
th
desi
gnatedper
sons
1.
2Empl oyeepayperioddet
ail
sandanydeduct
ionsandall
owances
npay
i r
ollsyst
em areent
eredi
naccor
dancewithsour
ce
documents
1.
3Paymentiscal
cul
atedduetoindi
vi
dualemployeet
oref
lect
st dpayandv
andar ari
ati
onsinaccordancewit
hemploy
eesour
ce
dat
a
2.Pr
epar
epay
rol
l
2.
1Payr
olli
spr
epar
edwi
thi
ndesi
gnat
edt
imel
i
nesi
naccor
dancewi
th
or
gani
zat
ional
pol
i
cyandpr
ocedur
es
2.
2Tot
alsal
ary
/wagesar
ereconci
l
edf
orpayper
iod,
irr
egul
ari
ti
esar
e
checked,
cor
rect
edorr
efer
redt
odesi
gnat
edper
sonsf
orr
esol
uti
on
2.
3Ar
rangement
sforpay
mentar
emadei
naccor
dancewi
th
or
gani
zat
ional
andi
ndi
vi
dual
requi
rement
s
2.
4Aut
hor
izat
ionofpay
rol
landi
ndi
vi
dual
payadv
icei
sobt
ainedi
n
accor
dancewi
thor
gani
zat
ional
requi
rement
s
2.
5Payr
ollr
ecor
dsar
epr
oduced,
checkedandst
oredi
naccor
dance
wi
thor
gani
zat
ional
pol
i
cyandsecur
it
ypr
ocedur
es
2.
6Secur
it
ypr
ocedur
esar
efol
l
owedf
orpr
ocessi
ngpay
rol
landf
or
mai
ntai
ningpay
rol
lrecor
ds
3.Handl
epayr
oll 3.
1Payrol
lenquir
iesarerespondedi
naccor
dancewi
thor
gani
zat
ional
enqui
ri
es andl
egi
slat
iverequir
ement s
3.
2Inf
ormat
ioni
spr
ovi
dedi
naccor
dancewi
thor
gani
zat
ional
and
l
egi
slat
iver
equi
rement
s
3.
3Ensur
eal
lenqui
ri
esout
sidear
eaofr
esponsi
bil
i
tyandknowl
edge
ar
eref
err
edt
odesi
gnat
edper
sonsf
orr
esol
uti
on
3.
4Addi
ti
onal
inf
ormat
ionorf
oll
ow-
upact
ioni
scompl
etedwi
thi
n
designat
edti
mel
i
nesi
naccor
dancewi
thor
gani
zat
ional
pol
i
cyand
procedur
es
Var
iabl
e Range
Desi
gnat
edpersons  i
mmediat
esuper
visor
mayincl
ude:  t
hosewhohavet
heaut hor
it
ytoappr
ovepay
rol
ldeci
sions

Payperi
oddetai
l
s  bonus
mayincl
ude:  casual wage
 commi ssion
 cont r
act
 piecewor k
 salar y
 wage
Deductionsand  caral lowance
al
lowancesmay  heal thinsur ance
i
nclude:
 i
ncomet ax
 meal allowance
 super annuat i
oncont ri
butions
 trav elallowance
 uni ondues
 other s
Payrollsystem may  manual
i
nclude:  comput eri
sed
Sourcedocument s  empl oyeeear ni
ngsandpay rol
lregi
ster
mayi nclude:  empl oyeer ecordsorhi story
 empl oyeet imesheet s
Vari
ationsmay  hol i
dayl oadi ng
i
nclude:  l
ongser v i
celeave
 ov ertime
 pai dleav e
 ratesofpay
 sickl eav e
 taxat ion
 unpai dl eav e
 other s
Preparingpay r
oll
may  calcul ationofgr osspay
i
nclude:  cashanal ysis
 elect ronicfundst ransfer
 netpay
 prepar i
ngcheques
 prepar i
ngpayadv iceslips
 taxat ionandot herdeduct i
ons
Payrollrecordsmay  cashanal ysissheets
i
nclude:  elect ronicfundst ransfer
 empl oyeesummar yrepor t
  endofmont hreport
s
 endofy earreport
s
 payadviceslips
 taxat
ionrepor t
s
Enquir
iesmay  email
i
nclude:  face-
to-
face
 fax
 tel
ephone
Legisl
ati
ve  rel
evantt axlaws
requir
ementsmay  confi
dential
it
yandsecur i
tyofr
ecords
i
nclude:
 HigherEducat i
onContr
ibuti
onScheme
 Medicalcarelevy
 pensionlaw

PROCESSPAYROLL
Defi
nit
ion
Theconceptpayrolli
sof t
enreferredtothet otal
amountpai dtoemployeesofaf i
rm as
acompensationfortheser v
icerenderedtof ir
mi nagi v
enper i
odofti
me.
IMPORTANCEOFPAYROLLACCOUNTI NG
Accounti
ngforpayrolli
spar t
icul
arlyi
mpor tantbecause:
1- Pay rol
loftenrepresentsthelargestexpenset hatacompanyincur s.
2- Bot hfederalandst at
egov ernmentsr equi
rethatdetai
ledpayr
ollrecordsbekept
and
3- Empl oyeesar esensiti
vetopay rol
lerrorsorir
regular
it
ies.Tomaint ai
ngood
employeemor al
epay r
ollmustbepai donat imelyandaccuratebasi
s.

 DEFI NI TIONOFPAYROLLRELATEDTERMS
a)Basi
cSal ary:
 Isther egul arbenef i
tpaidtoanempl oy
eeaspert heempl oy mentcont ract
?
b)ThePayPer i
od:
 Refer st othel engthoftimecov eredbyeachpay r
ollpay ment.
c)ThePayDay :
 Isthedayonwhi chwagesorsal ari
esarepai dtoempl oyees?Thi sisusual l
yon
thelastdayoft hepayper iod
d)APay r
ol lRegi ster(sheet):
 Isthel istofempl oyeesofabusi nessalongwi theachempl oyee’
sgr ossear ni
ngs;
deduct i
onsandnetpay( takehomepay )foraparticul
arpayper i
od?Thepay rol
l
register( sheet)ispreparedbasedonat tendancesheet s,punched( clock)cards
ortimecar ds.
e)PayCheck:
 Abusi nesscanpaypay rollbywrit
ingacheckf ortheamountoft henetpay .A
checki spr eparedinthenameofeachempl oyeeandhandedt oempl oyees.

f
)Wi
thhol
dingt
axesar
e
  Taxescol l
ect edf rom t heear ningsofempl oy eesbyt heempl oyerorganizationas
pert her egul ationsoft hegov ernment .
i
) All
owance:
 I sext r
abenef itpai dt oanempl oyeeaspert heempl oy mentcont ract,aft
ert he
empl oy eei sinduct ed.
 Thi smi ghtbet omot ivatet heempl oyeeorf ort hehar dshi phemayf aceorf or
transpor tat i
onexpenseset c.
j
)Ov ert
imeEar nings:
 Thi sisanext rapay mentpai dt oanempl oy eef orwor kdoneabov ethenor mal
hour sofwor k.I nEt hiopiathenor mal hour sofwor kis8hour sperday .
Andt hef ormul at ocomput etheor dinaryhour l
yr at ei s
Ordi
nar yhour lyr ate= Basi csal ary .
Nor mal hour sofwor k
OvertimeEar nings= Ov erti
me X or dinary X ov er ti
me
Hour swor ked hour l
yr ate rate
Overtimeear ningsar et heamountpai dtoanempl oy eef orov ertimewor kper f
ormed.
Laborpr oclamat ionNo.377/ 2002di scussedt hef ollowi ngabouthowov erti
mewor k
shouldbepai d:
Awor kershal l beent it
ledt obepai datar ateof :
i
. Oneandone- quar ter(1.5)t i
meshi sor di
nar yhour lyr at
ef orov ert
imewor k
performedbef ore10: 00P. Mi nt heev ening.
i
i.Oneandonehal f( 1.75)t i
meshi sordinaryhour l
yr ateforov ert
imewor kper formed
between10: 00P. M andsi x(6:00A. M)i nthemor ning.
i
ii
.Twot i
mest heor dinar yhour lyr ateforov ertimewor kperfor medonweekl yrest
days
i
v.Twoandonehal f(2½)t imest heor dinaryhour lyr ateforov ert
imewor kper f
or med
onapubl ichol iday .All i
nal l
,thegr ossear ningsofanempl oyeemayi ncludet he
basicsal ary, al
lowanceandov erti
meear nings

k)Grosssal ary
:
 Thesum ofbasi csalary,
allowances&ov erti
meear nings.
l
)Taxabl eIncome:
 Thi si sgrosssal ar
ylessanyi ncomeexempt edf r
om t ax.
m)Empl oy mentIncomet ax:
 I stheamountoft axcalculatedf r
om thetaxabl eincomedef inedabove.
n)PensionCont r
ibut i
on:
 I stheempl oyeecont ri
buti
onofmoneyt owardst heirreti
rementbenef i
tplan.
o)Otherdeduct ions:
 Thesear ev ariousdeduct i
onsexcepti ncomet ax&pensi onsuchdeducti
ons
i
ncl udecreditassociationpay ables,
cont r
ibuti
ont ot he RedCr oss,
Salar
y
adv ancestakenet c.

p)Tot
aldeduct
ion:
 Isthesum ofemploymenti
ncometax,
pensioncont
ri
but
ionandotherdeducti
ons.
q)NetPay:
 Isthehomet akepayoft
heindi
vi
dual
.Iti
sfoundbysubt
ract
ingt
otaldeducti
ons
 f
rom t
hegrosssal
ary
.
 POSSIBLECOMPONENTSOFAPAYROLLREGI
STER

1Employ eeNumber
Numberassi gnedt oempl oy eesf oridentif
icationpur posewhenar elati
vel
ylar
ge
numberofempl oy eesar ei nvol
vedi napay rollregister.
2NamesofEmpl oy ees
3Earni
ngs
Moneyear nedbyanempl oy eefrom v ari
oussour ces, t
hismayinclude.
b.BasicSalary
c.All
owances.
C.Over t
imeEar ning:
4Deduction:aresubt ractionsmadef rom theear ningsofempl oyeesr equi
redbythe
gover
nmentorper mi t
tedbyt heempl oyeehi msel f.
A)Employ mentI ncomeTax:Ev eryci ti
zenisr equi redtopayempl oy eeincometaxtothe
gover
nmenti nal mostal lcountries.InEt hi
opiaal so, employmentincomet axischar
ged
onthegrossear ningsoft heempl oy eeatther at esi ndicat
edunderschedul eAofthe
i
ncomet axPr oclamat i
onNo. 286/ 2002.

Shor
tcuttoI
ncomeTaxCal
cul
ati
on
Em ploym ent Incom e I n c o m e
(
permonth) TaxPay
abl
e
Over Birr To Birr
0 6 0 0 0 N o t a x
6 0 1 6 5 0 10% – 60.00
1
1 6 5 3 2 0 0 15% – 142.50
1
3 2 0 5 2 5 0 20% – 302.50
1
5 2 5 7 8 0 0 25% – 565.00
1
7 8 0 10900 30% – 955
1
Over 35% – 1500
10,900

Procl
amationNo.286/ 2002st atesthatthefol
lowingarenottaxabl
e
1-i
ncomef rom employmentr eceiv
edbycasual employeeswhoarenotr egul
arl
y
employedprovidedthattheydonotwor kformoret hanonemont hforthesame
employerinanytwelvemont hsperiod.
2-Pensi
oncont ri
buti
on,providentfundandal lf
ormsofr et
ir
ementbenef i
tscont
ribut
ed
byemploy er
sinanamountt hatdoesn’texceed15%oft hemont hl
ysalaryofthe
 employee.
3-Paymentsmadet o(anempl oy
ee)asacompensati
onorgrat
it
udeinr
elat
iont
o:
opersonali
njuri
essuf f
eredbythatperson
othedeathofanot herperson
4-PaymentsSubj ecttoreci
proci
ty,
incomefr
om empl
oymentofdipl
omati
c&consul
ar
repr
esentati
ves.

Thecounci
lofmi nist
ersregul
ati
onNo.78/
2002
Regul
ati
onsissuedpur suantt
othei
ncometaxprocl
amat
ionf
urt
herexemptt
he
fol
l
owingfrom incomet ax.

1-Amount spaidbyempl oyer

st ocov ertheactual
costofmedicaltr
eat
mentof
employees.
2-All
owanceinv i
ewofmeansoft ransportat
iongrantedtoempl
oyeesundercont
ract
ofemployment,i.
e.,
transportat
ional l
owance.
3-Hardshi
pallowance
4-Amount spaidbyempl oyeeinreimbur sementoftravel
i
ngexpensesi
ncurr
edonduty.

b)Pensi onContri
but i
on
Permanentempl oy eesagovernmentalor
ganizat
ioni
nEthiopiaisexpect
edtopayor
contri
bute7%oft heirbasicsal
arytothegovernment
s’pensiontrustf
und.Thi
samount
i
swi thheldbytheempl oyerfr
om eachemployeeoneverypay r
ollandlat
erbepai
dto
therespecti
vegov ernmentbody.

Theemployeri
salsoexpectedtocontr
ibut
et owardsthissamefund11%ofthebasic
sal
aryofever
ypermanentgov er
nmentempl oyee.Theref
ore,
thetot
alcont
ri
but
iontothe
pensi
onfundoftheEthi
opiangov er
nmentisequal t
o18%oft hebasi
csalar
yofall
ofits
permanentempl
oyees.

Businessandnon-
government alnot
-forprofi
tor
ganizat
ion(NGO’s)alsohavethi
ski
nd
ofaschemet obenefi
ttheiremployeeswi t
hsomemodi ficat
ions.Afundknownas
provi
dentfundi
sestabl
ishedandbot ht heemployerandtheempl oy
eecontri
bute
towardsthi
sfundmonthly.Whenanempl oyeeretai
nsorleavesemployment,alump
sum amountispai
dt ohim/ her
.

c)Ot herDeduct i
ons
Apar tf r
om theabov et
woki ndsofdeducti
ons,employeesmayi ndivi
duallyaut
hori
ze
addi t
ional deducti
onssuchasdeductionstopayli
feinsurancepremi ums, t
orepayl
oan
from t heempl oyer,
topayfordonati
ontocharit
ableorganizat
ion,contri
buti
onsto"l
dir
"
etc.
 Account ingEntr
iesforPayr
oll
Pr ovingt hepayroll
Bef orer ecordi
ngthetr
ansactionst
heinit
ial
stepisprovingthepay r
oll.I
tcanbedoneas
follows.

Tot
alEar
ning
 Basi cSalary XX
All
owances XX
Ov ertime XX
GrandTot alEar ni
ng XXXX (
a)
Deduct ions
Empl oyeeI ncomeTax XX
Pensi onCont ributi
on XX
Other XX
Tot alDeduction XXXX (
b)
Netpay( a-b) XXXX (
c)
Tot alDeductionandnetpay( b+c) XXXX (d)
Provet hat,a=d
i.
e.a=b+c
Recor
dingthePay mentofSal ar
y
Theaccounti
ngent ryfort hepaymentofsal
arywoul
dbe:
Dr
.SalaryExpense(Grandtotalear
nings)
…………………………. .xxx
Cr
.EmployeeIncomet axpayable………………………………. .….….xxx
Cr
.PensionContri
butionPayable(7%ofthebasicsalary)………...
..
xxx
Cr
.CreditAssoci
ati
onpayabl e/i
fany…………………………………. .xxx
Cr
.Loanpayable/ifany……………………………………………. ….
.xxx
Cr
.Cash( Netpay)
…………………………………………………. ….…xxx
(Torecordt hemont hlySalarypayment)
Recordingt hePay rolltaxexpense
Thepay roll
t axexpenseoft heorgani
zati
onthati
st heor
gani
zat
ion’
sshar
eofthe
pensioncont r
ibutionf oreverypermanentemployee(11%ofthebasi
csal
ary
),woul
dbe
recor
dedasf oll
ows
Dr-Pay rollTaxexpense
Cr.Pensi oncontri
buti
onpayable
(
Tor ecor dor gani zati
on’
spay r
oll
taxexpense.

Recor
dingt
hepay
mentofcr
edi
tAssoci
ati
onorl
oan(
ifany
)
CreditAssoci
ati
on……………….xxx
Loan………………………………. xxx
Cash…………………………………. .
xxx
(
Tor
ecor
d,empl
oyees’
credi
tassoci
ati
onorl
oanpay
ment
)

Recor
dingThePay
mentofWi
thhol
ding&Pay
rol
ltaxest
otheconcer
nedAut
hor
it
y.
Dr
.EmployeesI
ncomet axPayable……………………………………………. .
xxx
Dr
.Pensi
onCont r
ibut
ionpayabl
e(7%+11%ofbasicsal
ary)
……………..…xxx
Cr.Cash…………………………………………………………………. .
xxx
(Torecor
dpaymentofpay
rol
ltaxoft
heor gani
zat
ion&t
axwi
thhel
dfr
om empl
oyeest
o
theconcer
nedgover
nmentor
ganizat
ion)
EXERCISES
Exampl
e1
Addi
sInt
ernat
ional
BankBol
aBr
anchHasFi
veEmpl
oyeesWhoseSal
ari
esAr
ePai
dAccor
ding
ToTheEt
hiopi
anCalendarMont
h.TheFol
lowi
ngDat aRel
atesToTheMont hOfMegabi
t.
Employee Basi
c O ver All
owanc
Name Sal
ary T im e e
Kebede 2,500. 10Hr.Then4HrWeekend&4Hr.Holiday 900.0
Seman 00 2hr1.25 0
Girma 5,000. 6H r 1,000.0
Mamo 00 W eekend 0
Alemu 10,000. 8H r 1,200.0
Aber a 00 H oliday 0
Abebe 12,500. - 1,400.0
Kidus 00 0

Additi
onalInformati
on
-AllowanceTaxExempt ed400.00BrAllEmployment
.
-AllEmploy eesArePermanentand40hourar eworkedperweek.
-AllEmploy eeTheMont hBalanceArePaidAbayDam For1Years.
Required
1).Prepar
eAPay r
ollRegist
er(Sheet
)
2).Calcul
ateOT, I
ncomeTaxandJour nalEnt
ri
es

Addi sinternationalbank
Payrollregister
Megabi t30, 2003
Empl oye Basi Over Allo Gr os Taxabl I ncome Pensi Ab T o ta l Net
e c time w s e t
ax on ay deduct pay
name salar ance ear nin Incom Dam.
y g e
Kebede 2,50 320.
4 9 0 3,720.4 3,320.4 595. 11 1 208. 978.4 2,741. 9
seman 0 2 0 2 2 75 33 4 8
Girma 5,00 37 1,00 6, 37 5, 97 1, 428.
75 3 416. 2,195.4 4,179. 5
mamo 0 5 0 5 5 50 67 2 8
Alemu 10,00 1,25 1,20 12, 45 12, 05 3, 555 7 833. 5,088.3 7,361. 6
abera 0 0 0 0 0 00 33 3 7
Abebe 12,50 - 1,40 13, 90 13, 50 4, 062.
50 8 1,
041. 5,979.1 7,920. 8
kidus 0 0 0 0 75 67 7 3
to ta 30, 00 1,945.4 4,50 36,445.
4 34,845.
4 9, 641.
36 2,10 2,50 14,341.
3 22,204.0
l 0 2 0 2 2 0 0 6 6

Task2
dat i t e p/
rd e b i C r e d i t
e m t
Meg 3Salary 36,445.4
. 0expense 2 9,
641.
36
2 Incomet axpayable 2,
100.
00
0 Pensionpayable 2,
500.
00
0 Abayedam.Pay able 22,
204.
06
3 Netpay(cash)
3Payrollta 3 ,3 0 0 .0
0expense 0 3,
300.
00
Pensionpayable
3Incom e tax 9 ,6 4 1 .3
0payabl e 6
Pensionpayable 5,
400.
00
Abayedam.Pay able 2,
500 17,
541.
36
Cash

I
ndi
vi
dualassi
gnment(
10%)
INSTRUCTION:readandanalyzeeachquest ioncareful
lysothatwheny ouunder
stand,
answerthequesti
onscorrect
ly.Tr
yt owriteneatl
yandpr oofreadi
ngasy ougo.
1.AdmasUni versi
tyi
tsemployees’salar
yaccordingtotheEthiopi
ancal
endar
Month.Thef oll
owi
ngdatarelat
est othemont hofYekatit30,2013E.
C.

Transpor
ta Over
time
Emp.I
D Empl
oyee Basi
c ti
on Housi
ng hour
s
Name Sal
ary All
owance Allowance Worked Dur
ati
on
211 Tsegay
e Br5,
800 Br1,
250 - 10 Upto10PM
212 Zewdu Br1,
500 Br500 Br500 15 Publ
icHoli
days
213 Mehdi Br4,
500 Br1,
100 - - -
214 Roman Br2,
000 Br600 Br1,
000 12 WeeklyRestDays
215 Gemechu Br3,
200 Br750 - 14 Fr
om 10PM to6AM
Addi
ti
onali
nfor
mat
ion
 Al lworkersareexpectedtowor k176hour snormal worki
nghour
spermonth.
Thewor kershavedoneast heyhav ebeenexpect ed.
 Mehdi andGemechuagr eedt ohaveamont hlydeducti
onofBr600andBr400
forcredi
tassociat
ionrespect i
vely
.
 Al lworkersarepermanentexceptZewdu.
Requir
ed:
A.PreparePay rol
lRegist
erforthemont hofYekat i
t30,2013.
B.Recor dthenecessaryjour
nal entr
iesont hepaydayf orPaymentofSalar
y,Pay
rol
l
TaxExpenseandPay mentofWi thholdi
ngTax, PensionContri
buti
onandOther
Deductions.

Submi
tt
eddat
e15/
08/
2016E.
C

Gr
oupassi
gnment(
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Speci
fi
cati
on
1.Yourmar
kswil
lberecor
dedaccordi
ngtothei
rownr esponds,
soeachgroup
membersmustbeacti
vel
ypar
tici
pateandunder
standeachandeverypoint
.

2.OnEachgrouponly5member sar
eal
l
owed,
andr
egi
ster
ingmor
ethanone
gr
oupsarestr
ict
lyfor
bidden

Submi
tt
eddat
e15/
08/
2016E.
C

MetebaberPLCpayst
hesal
aryofit
semploy
eesbasedontheEt
hiopi
anCal
endar
month.Thefol
lowi
ngdat
arel
atetothemont
hGinbot2010

Empl
oy Empl
oyee Posi
ti
on pensi
on Al lowance Ov ert
im
ee Name s e
Number Earni
ng
1 Meseret
Wolde Manager 665Br . 1, 200Br. -
2 Aschal
ew Supervi
s 490Br. - 300Br.
Deme or
3 Sel
amGoshu Accounta 350Br. 800Br . 500Br.
nt
4 Kebede Techni
cia 329Br. 450Br . -
Ayenew n
5 SabaLemma Secr et
ary 175Br
. 500Br . 700Br.
Addi
ti
onalInf
ormati
on;
 Thenor malworki
nghouroftheemployeesi
s40hour sperweek
  Empl
oyeesandEmpl
oyer
spensi
oncont
ri
but
ioni
s7%and11%r
espect
ivel
y

 Al
loft
heal
l
owancesoft
heempl
oyeesar
enott
axabl
e

 Al
lempl
oyeesar
eper
manent
.

Requi
red
A.PreparePayr
ollRegi
sterforthemonthofGinbot2010andshowal
lthe
calcul
ati
onsusedtopr epar
et hepay
rol
lregi
ster
Recor
dal
lthenecessar
yjour
nal
ent
ri
es
Dani
elE.