Importance of Signature Control or Verification in a Payroll Environment
Payroll involves paying wages to your employees, making paycheck deductions and meeting other mandatory obligations. Due to its confidential nature, payroll information should be restricted to specific employees in the department. By implementing signature control measures, you help streamline the payroll department while protecting your company's financial health.
By requiring that managers, supervisors and employees sign off on payroll documents, you can detect whether your employees are following the chain of command and who made certain errors. For example, hourly employees are paid according to their time card hours, so signature control and verification is critical to this process. You might require that employees and managers both sign time cards before submitting them to payroll. The payroll processor then verifies that the proper signatures are obtained before processing paychecks.
When enforcing signature control standards in your payroll department, ensure that you are complying with related laws. For example, state law might say that you cannot withhold an employee’s paycheck because she did not sign or submit a time card.
Any change that affects your employees’ pay rates should go through a strict approval process. For example, by requiring that pay raises are approved by both an employee’s supervisor and that supervisor’s boss, you reduce the likelihood of those rates being changed. In this case, neither party can alter the employee’s pay rate without the other knowing about it. Another example would be if the payroll department receives paperwork to change an employee’s pay rate. If the document is not signed by those two parties, the pay change will not happen, thereby reducing the chances of embezzlement.
Only someone with proper authority should be allowed to sign payroll checks. For example, this person could be the owner, an equal partner of the business, an executive or the controller. To avoid having to sign paychecks each pay period, you can upload your signature electronically into the payroll software that you use to process paychecks. The software might allow you to add a second signature line. You must give your bank the signatures of those permitted to sign paychecks. The bank matches paycheck signatures with what it has on file for you, thereby limiting payroll fraud.
To prove that you distributed paychecks and pay stubs to your employees, you may have them acknowledge receipt through signature. This is particularly important when an employee wants someone outside of work to pick up her paycheck when she is absent from work. You can have her complete a standard form to designate a specific person to pick up her paycheck. That person should also sign for the check. A company with multiple departments might have a pickup form that each department must submit to payroll. The form gives designated employees the right to sign for and issue paychecks to the employees in their department.
Periodic auditing of your payroll department is vital to detecting whether your employees are adhering to the company’s signature control policy. Once or twice per year, have a qualified member of your staff or a third party auditor perform the audit. The results of the audit can help you determine whether you need to implement stronger internal controls.