This document summarizes the key aspects of a typical payroll processing system using batch processing. It discusses the master file containing employee data that is sorted by employee number and the transaction file containing weekly/monthly hours worked. At the end of each period, the master file is updated using the transaction file to calculate pays, update year-to-date totals, and generate payslips, financial reports, and error reports. The new master file is then used for the next processing period.

1. Payroll Applications
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2. • Payroll systems normally involve the use of batch
processing. This usually means that the tiles that are
needed are stored on separate magnetic tapes.
• There are two data files involved. The first is called the
master file and this holds all the data about the
workers. This data includes the employee number,
their name, their contact details, their rate of pay
and the pay they have received so far this year as
well as the taxes and insurance they have paid so far
this year.
Introduction

3. • The employee number is used as the key field and the file
is sorted in that order. There is less data on the second tile -
the transaction file. 'This is a temporary file as it contains
some data which can change from week to week or
month to month. It contains details of the number of hours
worked and any overtime with, of course, the employee
number. The transaction file also has details of any new
workers or workers who have left the company or any
worker whose details have changed.
• At the end of the week or month, depending on how
often the workers are paid, the master file is processed
using the transaction tile. Before processing, the
transaction tile has to be sorted into the same order as the
master file, i.e. records in order of employee number

4. • The computer calculates the pay of each worker
using the number of hours worked contained in the
transaction tile and the rate per hour from the
master tile. Payslips are then printed, together with
reports showing overall statistics as well as error
reports. The records from the old master file are
read and updated using these calculations and
any deletions, additions or amendments are made.
These records are written to a new tape which
becomes the new master file.

6. • The reports consist of financial reports, error reports and, of
course, payslips.
• The old master file contaiJ1s the data that was up to date at
the end of the previous week/month. The update. process
involves the calculation of the employees wage for this
week/month using the hours worked from the transaction file.
The wages are calculated together with any National
insurance payments and tax payments.
• These values are used to bring the year- to-date totals up to
date so that they can be written to the new master file. The
following week the new master file becomes the old master file
and is used with a new transaction file to produce new
payslips.

7. • The payslip contains information that can be found on the new
master file and also information from the transaction file.
• The master file provides information such as the employee
number, the department worked in, the pay rate per hour, the
tax code, National lnsurance number, year-to -date values
etc.
• To create the payslip, the above information is linked to the
transaction file containing the employee number and the
hours worked .
Payslips

8. Most payroll software has a report generator facility. This
provides detailed payroll listings and exception reporting.
Examples of rypical reports are as follows:
• information about all employees of the company
• information about employees in a given department
• information about the salaries of all employees
• National Insurance contributions for all employees
• the total amount of National Insurance contributions paid to
the tax
• the income tax that each employee has paid
Financial reports

9. • the total amount of income tax paid to the
tax authorities
• the amount of money paid to each bank
that employees have an account with
• all the earnings and deductions of
employees
• the earnings and deductions of each
employee by
• department
• a summary of all the totals of the earnings
and deductions of each department.

10. Exception reports - reports of certain validation
rules being broken -are also produced from the
system.
Examples might be:
• an employee earning an unusually large amount
of money
• an employee who has been on an emergency
tax code for a long period of time
• two employees having the same National
Insurance number.