One of our Payroll Specialists was recently asked to assist a company in navigating through a rather difficult separation process with an Employee. The Employee argued for his final settlement to be significantly more. He questioned the prorated work days calculation, the way the final settlement was determined and also requested to see evidence of leave days taken.
The Company was in a predicament. They had no set calculation methodology and were unable to produce records of leave taken, other than a few emails where leave was requested. This was typical of what so often happens where HR Administration and payroll is run without a compliant system. The potential is that it can very quickly develop into a crisis.
This prompted OPS to suggest a starter checklist for small businesses to consider as part of their setup process. (Established Companies may find it useful to check that you have considered these points.) If this is done in the early stages of Company setup, it can potentially save a lot of distress and expense later on.
1. Keep a master file of your employee data
We would suggest a web-based HR and payroll system to manage your Employee data. However, an Excel sheet with basic information should suffice in getting you started on your Employee master file. Employee details such as full name, job title, contact details, nationality, passport details, compensation and benefits, starting date, bank details and email addresses, can be maintained. Keep in mind for this to have value, it needs to be updated regularly.
2. Determine your cost to company of every employee
The compensation and benefits package alone is only a part of what an Employee is costing you. Elements such as the annual leave they are entitled to, the loss of productivity if they are on sick leave, the annual flight ticket back to their home country, the provision you have to make for their gratuity and medical insurance costs are but a few elements that need to be quantified. This will ensure you have a more accurate figure of what an Employee is actually costing your Company.
3. Asset control
It is indispensable to keep a record of assets that you allocate to Employees. By tracking laptops, mobile phones and other equipment and linking it to your accounting’s depreciation, you can calculate the value of these assets on a year-to-date principle. You can then determine when an asset needs to be replaced or returned when an Employee leaves the company.
4. Cost of employee benefits
Unless an Employee is aware of what the monetary value of the non-cash part of their compensation and benefits package is, they are unable to compare the full value your Company provides. Elements such as medical insurance, Salik, metro cards, lunches, parking permits etc. are not added to the cash component of their salary package, yet contribute to providing competitive, market-related pay. By understanding the value of these non-cash benefits, Employees can often elect to stay with your Company if offered an alternative position.
5. Accrue your end-of-service benefit
As yet, accruing for the end of service is not a legislative requirement in the UAE. Making provision for end of service benefits is generally not done by the majority of small and start-up companies. However, small companies minimise the cash flow risk when Employees leave the company, by consistent and regular accruing for gratuity payments.
We would encourage you to implement these five steps in your business processes if you are not already doing so.
Want to know more about how OPS can help you with your Payroll?