AMC Distributors is a limited company engaged in the manufacturing and distribution of paper products which are considered fast-moving consumer goods. The company had recently undertaken a successful total quality management (TQM) project to improve its manufacturing efficiency, expedite vendor payments and increase availability of finished products. For its next project, the company wanted to address problems in human resources (HR). By working with HR process owners, a focus for the project emerged the payroll process. Staffing the company has a staff complement of 150 employees consisting of factory workers, line supervisors, administrative and ancillary staff. Factory workers are hourly paid whereas supervisors, administrative staff and ancillary workers are paid a fixed salary. There are three different payrolls: Weekly (Factory workers), Fortnightly (Ancillary and Clerical staff) and Monthly (Managers and Supervisors). Overtime is paid based on approved submissions by Head of Departments supported by the respective timesheets. Time and a half is paid for work in excess of a 40 hour week and Double Time is paid to employees working on public holidays. Income Tax is at the rate of 10% of gross pay. Payroll system The company currently operates a manual payroll system. The Payroll Administrator maintains several Excel spreadsheets for payroll computations and reporting. It is very cumbersome and prone to errors which has resulted in errors in net pay, lateness in paying employees and late submission of monthly payroll taxes resulting in penalties. Although the Accountant reviews and signs off the Net Pay Listing and Tax Payable Listing for processing of payment, there are still a number of errors which are made. Employees are disgruntled and choose to make other arrangements to make payment for bank loans and insurance premiums as the tardiness and inaccuracies in the current system expose them to penalties for late payment on their external commitments. You are the Financial Controller for the company and have come under a lot of pressure from criticism of the poor quality inherent in the payroll function. You are contemplating your strategy in addressing the challenges faced with a manual system which has outgrown its capability to produce timely and accurate payroll information for paying employees and making the necessary payroll tax returns.

Required:

ii) Prepare a user specification for the acquisition of the payroll system (5 marks)