Reference no: EM132572968

Question -

A. Pelaga Catering Sdn. Bhd. is a company providing catering services to corporate and private customers. The company specializes in Arabian and Malaysian cuisine. The company is managed by Mr. Aidit, the manager, and currently has twenty staffs comprising eight full-time and twelve part-time staffs. Salaries for full-time and part-time staffs are paid in monthly and daily basis, respectively. When it concerns the full-time workers, they are permanent staffs with fixed salaries. Their salaries include gross salary and overtime allowance minus EPF and Socso contributions. The payroll activities of full-time staffs are explained in following paragraph.

The official working hours starts from 8.00 a.m. to 6.00 p.m., Tuesday to Sunday, where all staffs need to clock their time-in and time-out. Most of the time, staffs are required to work longer than the official working hours. The extra working hours are considered as overtime which entitled for overtime allowance of RM7 per hour. At the end of every month, Mr. Aidit reviews the time cards and calculates overtime hours of each full-time worker. He then calculates salary, overtime allowance, EPF and Socso contributions for each staff. Next, he prints payslips, prepare paychecks and distribute them to respective staffs. Additionally, in the first week of the following month, he remits EPF and Socso contributions via online payment and subsequently updates their respective records.

With regards to part-time staffs, they comprise of temporary staffs whom are hired on events basis. On the day of the event, the part-time staffs are required to report for duty to Mr. Aidit. They need to write their particulars in a record book as proof of attendance before they are assigned to their specified task. At the end of the event, the staffs report back to Mr. Aidit to received their salary. Mr. Aidit calculates the total working hours of each staff and multiply them with the rate of payment (i.e. RM8 per hour). He then makes cash payment to the staffs. The respective staffs sign the record book as proof of payment receipt.

At the moment, all tasks related to staff's payroll are handled by Mr. Aidit. Due to overwhelming demand for their service, the company is planning to expand its business. The expansion process will involve recruitment of additional full-time and part-time staffs. Consequently, this will create extra workload to the payroll processing task. Related to this, Mr. Aidit is considering two options. The first option is to hire a new staff to manage payroll function, whereas the second option is to outsource the function. Mr. Aidit had requested you to assist him by providing information and advice on the following matters.

REQUIRED -

(a) Explain the objective of payroll system.

(b) Based on payroll system at Pelaga Sdn. Bhd., suggest payroll activities that are suitable to be processed using batch processing or real-time processing mode. Justify your answer.

(c) Based on the options of either to hire new payroll staff or to outsource the payroll function, search all relevant information of the report to advise Mr Aidit. The report must include the following information. Please list the relevant references to support the discussion for this questions.

Payroll outsourcing concept

Advantages and disadvantages for each option. Provide example in your answer.

Possible risk for each option and the measure to minimize the respective risk.