Investigating the Nature of Payroll Accounting in Public Sectors



The study examines payroll accounting in public sector, adopting a secondary source of data and a regression method of analysis; the findings of the study showed that payroll accounting in public sector is essential for organizational performance. Findings also  showed that  and efficient payrolling can increase the performance rate of workers hence, enhancing the performance of public sectors in Nigeria. It was further noted from the finding that computerized system of payrolling can improve  and facilitate payroll preparation and accuracy in payrolling records. It is on this note that the study recommended that every public sector should ensure effective   system of Payrolling of all the staff in other to ensure effective salary payment to staff and Computerized system of Payrolling should be adopted in every public sectors  to help facilitate efficient Payrolling.




1.1 Background to the Study

A payroll is a company’s list of its employees, but the term is commonly used to refer to: the total amount of money that a company pays to its employees, a company’s records of its employees’ salaries and wagesbonuses, and withheld taxes(http// Payroll in the sense of “money paid to employees” plays a major role in a company for several reasons. From an accounting perspective, payroll is crucial because payroll and payroll taxes considerably affect the net income of most companies and because they are subject to laws and regulations (e.g. in the US payroll is subject to federal, state, and local regulations).

From a human resources viewpoint, the payroll is critical because employees are sensitive to payroll errors and irregularities: Good employee morale requires payroll to be paid timely and accurately. The primary mission of the payroll department is to ensure that all employees are paid accurately and timely with the correct withholdings and deductions, and that the withholdings and deductions are remitted in a timely manner. This includes salary payments, tax withholdings, and deductions from pay checks.

Companies typically generate their payrolls at regular intervals, for the benefit of regular income to their employees. The regularity of the intervals varies from company to company, and sometimes between job grades within a given company. Common payroll frequencies include: daily, weekly, bi-weekly/fortnightly (once every two weeks), semi-monthly (twice per month), and monthly(Payne & Charlie,2014) Less common payroll frequencies include: 4-weekly (13 times per year), bi-monthly (once every two months), quarterly (once every 13 weeks), semi-annually (twice per year), and annually (yearly) Businesses may decide to outsource their payroll functions to an outsourcing service like a Payroll service bureau or a fully managed payroll service. These can normally reduce the costs involved in having payroll trained employees in-house as well as the costs of systems and software needed to process a payroll. Where this may reduce the cost for some companies many will foot a bigger bill to outsource their payroll if they have a special designed payroll programme or payouts for their employees(Payne & Charlie,2014). In many countries, business payrolls are complicated in that taxes must be filed consistently and accurately to applicable regulatory agencies. Restaurant payrolls which typically include tip calculations, deductions, garnishments and other variables, can be difficult to manage especially for new or small business owners. Payroll bureaus also produce reports for the businesses’ account department and payslips for the employees and can also make the payments to the employees if required.

Another reason many businesses outsource their payroll is because of the ever increasing complexity of payroll legislation. Annual changes in tax codes, Pay as you earn (PAYE) and National Insurance bands as well as statutory payments and deductions having to go through the payroll often mean there is a lot to keep abreast of in order to maintain compliance with the current legislation.

On the other hand, businesses may also decide to utilize payroll software to supplement the efforts of a payroll accountant or office instead of hiring more payroll specialists and outsourcing a payroll company.

1.2     Statement of The Problem

Record showed that the Government of Nigeria spends almost 50 to 60% of its revenue on Personnel management every year at the detriment of other sectors of the Economy. According to the Honourable minister of Finance, Mr Olusegun Aganga in his address at the flag off of Integrated Personnel and Payroll Information System Phase II workshop held at the Sharaton Hotels Abuja, he said that in 2011 Federal Government Budget was projected at #4,226.19 billion, comprising #196.12 billion(4%) for statutory transfers; #542.38 billion (13%) for Debt servicing; #2,481.71 billion (59%) for Recurrent (Nondebt)expenditure and #1,005.99 billion (24%) for Capital expenditure. This huge bill  is said if not monitored and cut down through appropriate government policy and reform programme, we may wake up one day to see that all Government revenue is spent in paying salaries at the detriment of competing needs.  Another problem is the issue of ghost worker syndrome which is not  a new thing in Nigerian Public service, where a non-existing employee is being paid monthly. There are multiple payments of emoluments to a single employee and credentials are falsified coupled with false age of retirement. All this  is a big challenge, that at this age when almost every aspect of the world economy is computerized, Nigeria is still depending on manual records for her personnel and payroll information. Workers data are kept in paper files, their salaries are calculated manually and as such mistakes and fraud in form of overpayment, underpayment and payment of ghost workers always occur. On the other hand, government of Nigeria do not have the accurate number of civil servants and her budget is always an estimate. This has created some loop holes, whereby some ministries budget more than they require and use the excess for some other things other than payment of salary and allowances. Sometimes some will get personnel allocation that is quite less than what they need and for that reason they place some workers especially the new ones on allowances for many months thereby subjecting them to unnecessary hardship. It is based on this backdrop that this study is   necessitated into investigating payroll accounting in public sector.




  • Objectives Of The Study

The main objectives of the study is to investigate the nature of payroll accounting in public sectors. Specific objectives are to identify.

  1. The extent to which payroll accounting in public sectors have contributed to the performance of public sector.
  2. The extent to which computerized payroll accounting information processing system improved the effectiveness of public sector payroll accounting.

1.4 Research Question

The following research question was posed to guide the study as follows.

  1. To what extent have payroll accounting in public sectors  contributed to the performance of public sector.
  2. To what extent does computerized payroll accounting information processing system improved the effectiveness of public sector payroll accounting.

2.5 Research Hypotheses

In order to anchor the objectives of the study, the following  research hypotheses were where formulated and stated as follows

H01:  there is no significant contribution of payroll accounting to the performance of public sector.

H02:  There is  no significant  way in which computerized payroll accounting information processing system improves the effectiveness of public sector payroll accounting.



  • Significance Of The Study

The study is of benefit to public and private sectors and fellow researchers. To both public and private sectors, the study is of benefit since it will highlight the various differences in the traditional and computerized payroll. It will also highlight the benefit of payroll in organizational accounting information. The study will enable public organization to adopt the best payroll accounting policy which will enable adequate accounting recording in the organization. For follower researchers, the study will serve as a source of reference material for any who want to research on the payroll accounting or any other related topic.

  • Scope And Limitation Of The Study

The scope of the study covers payroll accounting in public sector . In terms of geographical location, the study covers Delta state public services.  The period under investigation covers 2007 -2015

  • Definition Of Terms

For the purpose of clarity, the following words used  in the study are defined as used in the study.

Payroll: – Payroll is the sum of all Financial records of Salaries for an

employee, wages, bonuses and deductions. In accounting, payroll refers to the amount paid to employees for services they provided during a certain period of time.

  1. ii) Personnel: – Personnel simply defined according to the Oxford dictionary is staff; persons employed in any work, especially public undertakings and the armed forces.

Large organisation: Business unit with share capital of more than N5 million and a workforce not less than 100.

NSITF: Nigeria Social Insurance Trust Fund

OA: Office Automation

Oracle: Computer software being used for processing financial transaction

PAYERS: Computer software being used for processing personnel data and payroll information.

PM: Project Management

SDK: Software Development Kit

TAM: Time and Attendance Management

VAT: Value Added Tax