ASSESSMENT OF CENTRALIZED PAYROL

SYSTEM

(Case study: Ethio telecom Yirgalem

branch)

A Senior Essay Submitted to in partial fulfillment of the requirement for the

Degree of BA in Accounting and finance

HAWASSA UNIVERSITY

COLLEGE OF BUSINESS AND ECONOMICS

DEPARTMENT OF ACCOUNTING AND FINANCE

Prepared by: - TAMRAT WORKU

Advisor: - MEBRAT (MS.c)

June

YIRGALEM, Ethiopia

1
Acknowledgement
At first, may all the honor and glory be extended to the exalted Heavenly God, for His help,
guidance, and encouragement, which have enabled me to complete my study despite difficulties!

I also thank for my Advisor, Inc Mebrat not only for spending his valuable time in reading my
manuscript and also for his valuable, comments, suggestions and criticisms that guided me doing
the research and writing it up. Without his support and cooperation, this work would not have
been finalized.

I am also indebted to my friends, especially Seid and Tabor. I wish to express my gratitude to all
Ethio telecom human resource department employees and especially for the head of the
department. Finally, I would like to thank my family for supporting me in every way and act
every moment all these years,

i
Abstract

This research paper focuses on the assessment of centralized payroll system a case study on
Ethio telecom Yirgalem branch .To achieve this objective, both primary and secondary data
sources were obtained using questioner and interview where as secondary data were collected
from relevant documents, records and manual of the institution. The result of the data analysis
showed that, the centralized payroll system is advantageous for the branch employees. But there
is a work load in head office which is located in Addis Ababa. However, it is advantageous for
the Ethio telecom. So it is advisable for other organizations to implement the centralized payroll
system for their organization.

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Contents
Acknowledgement............................................................................................................................i
Abstract............................................................................................................................................ii
LIST OF TABLE..................................................................................................................................iv
CHAPTER ONE..................................................................................................................................1
1 INTRODUCTION.............................................................................................................................1
1.1 Background of the study........................................................................................................1
1.2 STATEMENT OF THE PROBLEM..............................................................................................2
1.3 OBJECTIVE OF THE STUDY......................................................................................................3
1.3.1 GENERAL OBJECTIVE........................................................................................................3
1.3.2 SPECIFIC OBJECTIVES.......................................................................................................3
1.4 Research Question.................................................................................................................3
1.5 SCOPE AND LIMITATION OF THE STUDY................................................................................3
1.6 SIGNIFICANCE OF THE STUDY................................................................................................4
CHAPTER TWO.................................................................................................................................5
2. LITERATURE REVIEW....................................................................................................................5
2.1. Definition of payroll..............................................................................................................5
2.2. Payroll accounting.................................................................................................................5
2.3. Centralized payroll system....................................................................................................6
2.4. Benefit of Centralized payroll system...................................................................................6
2.4.1. Issues with payroll system consolidation.......................................................................8
2.5. Decentralized Payroll Accounting.........................................................................................8
2.5.1. Advantage of decentralized payroll system...................................................................9
2.5.2. Problems with a Decentralized payroll system.............................................................9
2.6. Pay and Employee’s satisfaction.........................................................................................10
2.7. Liability for employees earning...........................................................................................10
2.7.1. Payroll Accounting (Ethiopian Case)............................................................................10
2.7.2. Pension contribution....................................................................................................11

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 2.7.3. Computation of Employee Net Pay..............................................................................12
2.8. Accounting system for payroll............................................................................................12
2.8.1. Payroll Register.............................................................................................................13
2.8.2. Employees earning records..........................................................................................13
2.8.3. Payroll check.................................................................................................................13
2.9. Professional responsibilities of the payroll accountant......................................................13
2.10. Laws Affecting Payroll Accounting....................................................................................14
2.11. Computerized payroll Accounting System........................................................................14
CHAPTER THREE.............................................................................................................................16
3. RESEARCH METHODOLOGY.......................................................................................................16
3.1 Data types, data sources and data collection method........................................................16
3.2 Sample and Sampling method.............................................................................................16
3.3 METHOD OF DATA ANALYSIS...............................................................................................16
Chapter four...................................................................................................................................17
4. DATA ANALLYSIS AND INTERPRETATION...................................................................................17
4.1 introductions........................................................................................................................17
4.2 Data Presentation, Analysis and In3.3.1 Analysis of personal data of the respondents.....17
4.2.2 Analysis of questions on salary.....................................................................................21
4.2.3Analysis on centralized payroll related questions.........................................................23
4.2.4Analyses on forestation of workers and computerized payroll system.........................25
CHAPTER FIVE................................................................................................................................28
CONCCLUSION AND RECOMMENDATION.....................................................................................28
5.1. Conclusion...........................................................................................................................28
5.2 Recommendations...............................................................................................................29
Reference.......................................................................................................................................30
Appendix........................................................................................................................................31

iv
LIST OF TABLE
Title page
Table 4.1 Sex distribution of the respondents………………………………………….……….17

Table 4.2 Age distribution of the respondents………………………………………….……….18

Table 4.3Educational level of the respondents…………………………………………….……19

Table 4.4 Working experience of the respondents………………………………….................20

Table 4.5 Payable of salary on time…………………………………………………..………….21

Table 4.6 Advantage of centralized payroll system……………………………….……………..23

Table 4.7 Workload versus non workload in payroll system…………………………………….24

Table 4.8 Number of frustrated versus non frustrated employees…………………….……….25

Table4.9 Computerized payroll accounting system………………………………….………….27

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CHAPTER ONE

1 INTRODUCTION
1.1 Background of the study

The term payroll refers to the amount paid to employees for services they provide during a
period and also the financial record of employee’s salaries, wages, bonuses, net pay and
deductions (warren, reeve, fess 1995).

A payroll accounting is an essential accounting activity of any business that employs workers.
The area payroll accounting involves calculating the earnings of employees and the related with
holding for taxes and other deductions, recording the results of payroll activities and preparing of
payroll tax returns.

In addition appropriate and accurate preparation of payroll is helpful for proper interaction of
employer and employee in organization. Employees need proportionate payment for service they
rendered on time. In some organization, employers may fall to full every employees need due to
work load or some other reasons. When such contingencies occur employees may come to be
resistant to orders which come from spurious.

The area of accounting involves calculating the earning of employees and related withholding
taxes and other deduction, recording the results of payroll activities and preparing of payroll tax
return. The payroll accountant or payroll professional needs a working knowledge of accounting,
the various laws that affect the payroll activities of accompany and specific company policies
(Carse and Slater, 1995-1996)

The payroll function can be centralized, decentralized or a hybrid of the two. The centralization
of the payroll function permits the establishment of a uniform system of time keeping record
keeping and payroll processing. Hence the centralization of payroll activities provides for
uniform treatment of all employees and more effective control with the decentralization of the
payroll process many responsibilities and activities shift from the central payroll administration
office to the department level. (Carse and Slater, 1995-1996)

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Centralization is a method of combining the function of several department of an organization in
to a single department. For example, a state of government may decide to shut down individual
information technology function for state environmental policies and way department and give
the responsibilities to single information technology department which handles the computer
systems of multiple agencies (WWW.Ehow.com)

In this study the researcher try to assess the centralize payroll system in Etio telecom Yirgalem
branch. And after assessing this study, will have many significance such as reduce redundancy,
monitoring staff, reduced regulatory cost and the other most important significance of this study
is that to get BA degree, because this is one of the requirement to the researcher to be graduated.
And when the researcher try to study, the researcher use both primary and secondary data. The
primary data will be collected through questionnaire and personal observation of the researcher
and in the secondary data will be collected from website of the organization. The other is the
researcher use judgmental sampling to select a sample from the total population. The main part
of this study will try to give a solution to the problem that faces the organization, when that
organization uses centralized payroll system such as, the organization incur high amount of
money in order to buy centralized payroll software package, human calculation error.

1.2 STATEMENT OF THE PROBLEM

Ethio telecom is an organization that gives service to the community, this services produced by
cooperating human power and other material. The organization incur cost for those material and
human power as we know that cost to human power is called salary so in order to pay this salary
the organization uses centralize payroll system and when this organization uses centralize payroll
system it may face several problems. Such as,

 The organization incurs high amount of cost in order to buy centralized payroll software
package
 Human calculation error when that organization made payroll for employees
 It takes significant amount of time and expense when that organization makes a payroll to
its employees

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1.3 OBJECTIVE OF THE STUDY
1.3.1 GENERAL OBJECTIVE

The general objective of this study is the assessment of centralized payroll system in Ethio
Telecom yirgalem branch.

1.3.2 SPECIFIC OBJECTIVES

1. To assess the effects of errors or irregularities on the organization

2. To evaluate the degree of workload in payroll section due to centralized payroll system.
3. To assess awareness about negligence as a cause for the frustration of employees in the
organization.

1.4 Research Question

This research study was tried to answer the following question;

1. Are there any payroll errors or irregularities in the organization?

2. How does centralized payroll system create workload in payroll section?

3. Is there any employee frustration created due to the employment of centralized payroll
system?

4. What is the difference between the decentralized payroll system and the newly introduced
centralized payroll system in Ethio Telecom?

1.5 SCOPE AND LIMITATION OF THE STUDY

The researcher mainly focused on the assessment of centralized payroll system in Yirgalem
Ethio telecom. This study used employs of yirgalem Ethio telecom particularly that who has
strong relationship with the study area. Besides, the study was also cover secondary data of
yirgalem Ethio telecom from 2014 up to 2015. When the researcher doing this research paper the
researcher faced some limitation. These are

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  Unwillingness of respondent to give full information
 Shortage of time
 Shortage of finance
 Shortage of personal computer
 Lack of research experience
 Lack of written document about centralized payroll system

1.6 SIGNIFICANCE OF THE STUDY

The main purpose of this study is

 The result of the study expected to give certain knowledge for the managers as well as for
the employs of the organization
 The significance of the study to the organization
 Reduce redundancy
 Monitoring staff
 Reduced regulatory cost
 Lowering real state expense
 After completing this study it may encourage other researcher to carry out further
investigation and also serve as reference for their work
 The other importance of this study is that it helps the researcher to get BA degree because
this is one of the requirements for the researcher to be graduated.

CHAPTER TWO

2. LITERATURE REVIEW
2.1. Definition of payroll

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The term payroll refers to the amount paid to employees for services they provide during a
period and also the financial record of employee’s salaries, wages, bonuses, net pay and
deductions (warren, reeve, fess 1995).

Payroll encompasses every employee of accompany who receives a regular wage or other
compensation. Some employees may be paid a steady salary while others are paid for the hours
worked or the number of items produced. All of these different payment methods are calculated
by a payroll specialist and the appropriate paychecks are issued. Companies often use objective
measuring tools such as time cards or time sheets completed by supervisors to determine the total
amount of compensation due each pay period. After a payroll accountant multiplies an
employee’s hours by his or her pay rate, the gross income is entered in to a calculator or a
computer program.

2.2. Payroll accounting

A payroll accounting is an essential accounting activity of any business that employs workers.
The area payroll accounting involves calculating the earnings of employees and the related with
holding for taxes and other deductions, recording the results of payroll activities and preparing of
payroll tax returns.

In addition to this definition, the payroll accountants or payroll professional needs a working
knowledge of accounting, the various laws that affect the payroll activities of a company and
specific company policies.

It is also a process, like any accounting activity that involves a number of tasks to be performed
according to specific timetables. The cycle of paying employees in the payroll accounting
process can be broken into five steps that occur every time employees are paid.

Step1. The employers must keep track of the hours that each employee works or employers will
keep a written time sheet for tracking hours.

Step2. At the end of the pay period, the total of the hours worked for each employee will be used
in arriving at his/her gross earnings. Calculating grows earnings can be as simple as finding the
total of the hours worked and then multiplying the rate of pay per hour by total hours.

Step3. The employee’s gross earnings are then used as the base amount in calculating the
amount of federal, state, and local income tax to be withheld for the pay period.

5
Step4. Employee pay check are prepared, signed and given to employees on their pay day

Step5. The payroll accountant then records the earnings and deductions for each employee on a
pay period basis.

Generally, there are two accounting records used in recording payroll activities, those are the
payroll register and the employee earnings record (carse slater, 1995-1995)

2.3. Centralized payroll system

Centralized payroll in large organization is one of the role of human resource, which allows cost
saving and efficiency measures to be implemented and exercised, when payroll is done at local
level in individual offices or work sites, times and overall efficiency of human resource
department is decreased. The task of payroll reporting to central administration for their adds to
time spend and takes away from other human resources duties (WWW.Ehow.com)

Centralization payroll occurs when an organization such as a company, government or other

group concentrates authority over the whole to small group (for example, top management. This
type of organizational structure reduces operational cost (WWW.Ehow.com).

2.4. Benefit of Centralized payroll system

Centralization is a method of combining the function of several department of an organization in

to a single department. For example, a state of government may decide to shut down individual
information technology function for state environmental policies and way department and give
the responsibilities to single information technology department which handles the computer
systems of multiple agencies (WWW.Ehow.com)

1. Reduce redundancy

Centralization can reduce redundancy. A department may spend time designing a payroll system
which another department also hires workers to design a system. A consolidated accounting
department can create a single payroll system which can maintain the data for every agency it is
responsible for. This also makes it much easier to establish and additional state government
agency it necessary, since accounting department already has effective payroll available.

2. Monitoring staff

6
Centralization provides monitoring advantages. A manager may be responsible creating a budget
for multiple agencies. It these agencies establish a separate department for task such as hiring
employees, the manager has to contact each agency’s department individually to determine how
much money they need. A consolidate human resource department that organizes information for
the entire agencies job applicant has all the relevant information necessary to estimate hiring
expenses.

3. To provide accurate financial data

The responsibility of centralized payroll is to provide accurate financial data to the various state
and other regulatory agencies. Concerning salary expenditures, and to coming will all
governmental and contractual regulations pertaining to the payroll function

4. Reduced regulatory costs

Costs can also be reduced through centralization in that centralized organization has uniform
rules and centralized enforcement. Centralization reduces overall regulatory costs as well as
prevents regulatory arbitrage, creating a working environment that has greater consistency and
better accountability. In this way centralization can also be said to improve security.

5. Lowering real state expenses

Centralization can reduce real state cost individual agency may be located across the state or
across the country and some of the agencies may be located in areas with high cost of living.
Even if a centralized department maintains the amount of equipment and the same number of
employees, it can be housed in a single location in remote areas where the cost of renting a
building is lower.

2.4.1. Issues with payroll system consolidation

Though a centralized payroll system is recommended, there are a variety of problems associated
with creating it. These include:

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  cost A single, centralized payroll system may required the purchase of a new payroll
software package though this cost will hopefully be offset by the costs of the smaller
payroll system being eliminated.
 Database conversion there is a significant amount of time and expense associated with
the conversion of all existing payroll data bases in to the format of the new payroll data
bases as well as testing the data to ensure that the conversion is accurate
 Tax rate conversion The tax rates associated with all employee locations must be
properly integrated in to the centralized system
 Timing it is generally easiest to implement a payroll conversion project as of the
beginning of the new calendar year in order to avoid converting data in to the new system
for a partial year. (WWW.accountingtools.com)

2.5. Decentralized Payroll Accounting

People soft payroll system is a decentralized payroll system that allows a department to process
and make adjustment to employees hours worked record overtime and process any leave or
compensatory time used during the certified pay period. Two people are involved in the payroll
process, the process and the authorized. The authorized is responsible for reviewing each
transaction entered by the processor for accuracy and approving the payroll. The processor is
responsible for entering certificate hours and recording the appropriate level transactions for the
pay period (WWW.accountingtools.com)

2.5.1. Advantage of decentralized payroll system.

Decentralized payroll systems makes delegation of authority to regional office to prepare part of
payroll data to improve quality of data. Delegation of authority means decentralized payroll
system. It is known that, how decentralization has costs, which often may exceed the benefit.
Besides, decentralized payroll errors can completely be avoided through decentralization. The
major advantage of using decentralized payroll system is employees can easily and quickly
understand from payroll related problems.

Generally, the degree authority decentralized payroll system may differ on the basis of risk
involved, but routine tasks of payroll processing have to be delegated to regional offices.

8
2.5.2. Problems with a Decentralized payroll system.

The following are all problems related to decentralize payroll system. Those are:-

 Records Employee payroll records are stored locally and so must be manually shifted to
a new location if an employee is transferred. This also introduces the prospect of data
entry errors every time payroll records are re-entered in to a different system.
 Status When an employee is transferred to a new location, he or she must be terminated
in one system and set up as a new a new employee in the payroll system of the location to
which the employee has moved. This makes it difficult to determine the original hire date
or term of employment, as well eligibility for medical insurance and pension plan
vesting.
 Reporting:- It is difficult to aggregate information from multiple payroll systems for
company as a whole must pay more social security tax matches for employees who are
transferred between payroll systems, since the payroll cap must be attained in each
system before the match is eliminated.

Because of these issues, it is more efficient to consolidate all local payroll systems in to
centralized payroll operation that uses a single database of employee payroll information
(WWW.accountingtools.com)

In short, the cost of payroll system centralization is significant and so should be reviewed in
detail before the decision is made to undertake a full or partial system consolidation.

2.6. Pay and Employee’s satisfaction

Pay satisfaction refers to an employee’s liking for or dislike of the employee’s compensation
package, including pay and benefits. In fact the sheer complexity or reward system made up of
numerous components like base pay bonuses, benefits and services makes it even more difficult
to research employee’s satisfaction. The clearest indication of dissatisfaction may be patterns of
absenteeism and turn over.

2.7. Liability for employees earning

9
The term salary is usually applied to payment for managerial, administrative, or similar services.
The rate of salary is ordinary expressed in terms of a month or a year. Remuneration of manual
labor, both skilled and unskilled, is commonly called wages and is stated an on hourly, weekly,
or place work basis. In practice, the term salary and wages are often used interchangeably. The
basis salary or wages of an employee may be supplemented by commissions, bonuses, profit
sharing, or cost of living adjustments. The form in which remuneration is paid generally has no
effect on the manner in which is it treated by either the employer or the employee. Although
payment is usually in terms of cash it may take such forms as securities, notes, lodging, or other
property or services salary and wage rates are determined, in general, by agreement between the
employer and the employees. Enter pries engaged in interstate commerce must also follow the
requirements of the labor standards acts.

Employers covered by this legislation, which is commonly called the federal wage and hour law,
are required to pay a minimum rate of 11/2 times the regular rate of all hours worked in excess of
40 hrs per week (Fess and Warren, 1995)

2.7.1. Payroll Accounting (Ethiopian Case)

Payroll contains the total amount paid to employees as a compensation for services they rendered
in a particular period. According to the recent Ethiopian proclamation, employee income tax has
to be computed on the following schedule.

Employment income (per month) Tax rate (%) Deduction

Over birr To birr
0 150 Exempted -
151 650 10% 15
651 1400 15% 4705
1401 2350 20% 117.5
2351 3550 25% 235
3551 5000 30% 412.5
5001 and above 35% 612.5

Generally, taxable income from employment includes salaries, maps, allowances director’s fees
and all payments in cash and benefits in kind.

10
Income tax Amendment proclamation No 30/1992 issued on October 12, 1992 stated that the
following categories of payments in cash or benefits in kind are exempted from taxation.

 Medical costs incurred by employer for treatment to employees

 Transportation allowances paid by employer to its employees
 Reimbursement by employer of traveling expenses incurred on duty by employees
 Traveling expense paid to transport employees from elsewhere to place of employment
and to turn up on completion of employment.

2.7.2. Pension contribution

Permanent employees of an organization the employees of which are governed by the existing
regulations of Ethiopian public servants are expected to pay or contribute 4% of their basic
(monthly) salary to the government pension trust fund. This amount should be withheld by the
employer from the basic salary of each employee on every payroll and later be paid to the
respective government body on the other hand; the employer is also expected to contribute
towards the same fund 6% of the basic salary of every permanent employee of 7%. Thus total
amount (6% of the total basic salary of all permanent employees) is the amount of payroll taxes
expense for the employer. The total contribution to the pension trust fund of the Ethiopian
government is equal to 10% of the total basic salary of all permanent employees of an
organization. 4% comes from the employees and 6% comes from the employer. This enables a
permanent employee of an organization to be entitled to the pension pay given that the employee
has satisfied the minimum requirements to enjoy this benefit when retired.

2.7.3. Computation of Employee Net Pay

Gross earning for a payroll period less the payroll is often yields the amounts to be paid to the
employee, who is often called the net pay or take home pay. (fess and warren, 1995)

2.8. Accounting system for payroll

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Accounting system for payroll are concerned with the records and reports associated with the
employer employee relationship. It is important that accounting system provide safeguards to
insure that payments are in accord with management’s general plan and its specific authorization.
All employees of a firm expect and entitled to receive their numeration at regular intervals
following the close of each payroll period. Regardless of the number employees and the
difficulties in computing the amounts to be paid the payroll system must be designed to process
the necessary data quickly and assure payment of the correct amount to each employee. The
system must also provide adequate safeguards against payments to fictitious persons and other
misappropriations of fund.

In addition, payroll data may be useful in negotiations with labor unions, in setting employee
grievances, and in determine rights to vacations, sick leaves, and retirement pension.

Although complex organizational structures may necessitate rate the use of detailed subsystems,
the major parts to most payroll systems are the payroll register, employees earning records and
payroll check (Warren, Fess, Reeve, 1996)

Each of these major payroll components is illustrated & discussed in the following sections.

2.8.1. Payroll Register

The payroll register is the accounting document that provides a summary of payroll information
for a given pay period. Its design varies according to the number and classes of employees and
the extent to which computers are used.

2.8.2. Employees earning records

The necessity of having the cumulative of each employee’s earnings really available at the end of
each period. It is essential, therefore, that detailed records by maintained for each employee. In
addition to space for recording data for each payroll period and the cumulative total of earnings,
there are space for quarterly totals and the year total.

2.8.3. Payroll check

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One of the principal out puts of most payroll systems is series of payroll check of the each pay
period. The data needed for this purpose are provided by the payroll register, each line of which
applies to an individual employee. It is possible to prepare the check salary by reference to the
use amount column of the register. (Warren, Fees, Reeve, 1996)

2.9. Professional responsibilities of the payroll accountant

The payroll professional is placed in a fiduciary position in that he or she deals on a daily basis
with confidential employee data and company information. The employer places trust in the
payroll professional to maintain confidentiality and a professional attitude at all times when
handling and processing payroll information. The need for confidentiality in payroll accounting
cannot be over emphasized. Serious problems may result if sensitive payroll information is
disclosed. The payroll professional must be aware of this fact when dealing with employee and
personnel data, and use great care when working with this information. Another responsibility of
a payroll accountant is to maintain a professional attitude toward job duties and tasks. There are
four job goals or standards that the payroll professional should strive for as part of maintaining a
professional attitude. These four payroll accounting objectives are accuracy compliance,
confidentiality and timeliness.

Payroll professionals should do their very best to be accurate when computing earnings and
deductions. Errors are costly and time consuming, and as in any area of accounting, one should
always strive to “do the job right the first time”.

The payroll accountant must make every effort to comply with the many rules and laws that
directly and indirectly affect the payroll accounting process. Complying with the rules governing
payroll accounting is a key goal of the payroll professional payroll professional keep employee
information confidential at all times, both on and off the job. Casually discussing salaries or
work schedules or employees personal problems with co-workers may lead to company-wide
rumors and discontent. Competent payroll professionals maintain the confidential nature of
information about employees’ management matters (Carse and Slater, 1995-1996).

13
2.10. Laws Affecting Payroll Accounting

Payroll accounting as a profession today can directly trace its beginning and roots to the
enactment of several major federal laws dealing with employment of workers and payroll taxes.
Payroll accounting would no doubt be different today in its structure and function if there were
no federal or state laws in place that directly affected how the payroll accountant does his/her
job.

The purpose of federal employment law is to set standards ensure equitable and fair treatment of
workers in the areas of earnings, unemployment and equality in hiring and promotion.

Still other federal tax laws govern payroll taxation and withholding. These laws are part of what
are commonly known as the internal revenue code of 1986 and social security act of 1935.
(Carse and Slater, 1995-1996).

2.11. Computerized payroll Accounting System

Computerizing payroll accounting tasks will scale the payroll professional considerable time and
take much of the drudgery out of recording payroll activities. For many employers, not to
computerize payroll accounting activities would be a major mistake.

A computerized payroll accounting system can often be obtained as an add- on program (or
module) that will complement an existing general ledger software program, or it can be
purchased and used as a standalone system.

Payroll accounting programs that can be used as part of (or a module of) a larger general ledger
software package will create and post the appropriate journal entries as well. Convenience,
speed, and accuracy are tangible benefits of using a computerized program to process a company
payroll. (Carse and Slater 1995-1996).

14
CHAPTER THREE

3. RESEARCH METHODOLOGY
3.1 Data types, data sources and data collection method

The researcher used qualitative and quantitative data. The required qualitative and quantitative
data was obtained from primary and secondary data sources. The primary data collected through
questionnaires, interviews and personal observation of the research. The secondary data collected
from website of the organization.

3.2 Sample and Sampling method

From types of non probability sampling, the researcher used judgmental sampling method
because the information important for the study would collect from a specific group of
professional that has a knowledge and skill in payroll system.

Yirgalem Ethio Telecom has 20 employees until May 2015 and the researcher selected human
resource department, by assuming that the selected department employees are well aware of
about the topic. Therefore, from the total employees of the organization i.e. from 20 workers 10
employees selected to take part in the study.

3.3 METHOD OF DATA ANALYSIS

15
This is the most important component of the study. Responses of respondents will be collected,
organized, analyzed, and interpreted based on descriptive analysis. To reduce possible difference
of respondents and proper handling the data will be edited properly. This is because the data are
expected to be entirely of qualitative and quantitative nature. The data presented in a precise
form by using tables, percentages, charts and written form

Chapter four

4. DATA ANALLYSIS AND INTERPRETATION

4.1 introductions

The main purpose of this chapter is to analyze data collected through questionnaires and
interviews related to assessment of centralized payroll system in Ethio telecom Yirgalem branch.
As indicated in chapter one relevant data were gathered through questionnaires. The
questionnaires conducted for Ethio telecom Yirgalem branch data’s are gathered from the
organization employees.

The study has the general objective of investigating on the assessment of centralized payroll
system on Ethio, Telecom Yirgalem branch. The analysis and interpretation will be made based
on questionnaires distributed to 10 employees of the organization. Yirgalem Ethio Telecom has
20 employees as of May 2015 and the researcher has selected human resource department by
assuming that the selected department is well aware of the topic. The data presented in a precise
form by using tables, percentage, charts and written form and the results are discussed following
the data presentation.

4.2 Data Presentation, Analysis and In3.3.1 Analysis of personal data of the
respondents
Table 4.1: sex distribution of the respondents

Personal detail Number of Percentage responses

Sex
respondents
Male 4 40%
Female 6 60%

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 Total 10 100%
Source: questionnaire, 2015

Chart 4.1 sex distributions of the respondents

70
sex distrbution
60

50

40

30
percentage
20

10

0
male female

According to table 4.1, 60% of the respondents are females, while 40% of the respondents are
male. Based on the information one understands that the involvement of male employees in the
organization is less than the female employed. In any case, however, both male and female are
participating in the activities of organization.

Table 4.2: Age distribution of the respondents

Age category in years Number of respondents Percentage of responds

Up to 25 0 0%
25-35 6 60%
35-45 3 30%
Above 45 1 10%
Total 10 100%
Source: questionnaire, 2015

17
Chart 4.2 Age distribution of the respondents

age destribution
70
60
50
percentage As we
40
30 can see
20
in
10
0 table
up to 25 25-35 35-45 above 45
4.2,
the
researcher divided age of the respondents in to four sections as up to 25 years, 25-35 years, 35-
45 year and above 45 years. So, in reference to this table, around 60% of the sample respondents
are found to be between 25 and 35 years of age, 30% of the respondents are between 35 and 45
years of age, and 10% of the respondents are above 45 years of age. Majority of the sample
respondents are found in the productive age group. This means the employees being found in the
productive age category.

Table 4.3 Educational level of the respondents.

Education is the back bone for the development of every country and education provides
important contribution for people by creating awareness and changing attitude.

Educational level Number of respondents Percentage of respondents

Grade 12th complete - -
Certificate - -
Diploma graduate 1 10%
Bachelor degree 8 80%
Masters and above 1 10%
Total 10 100%
Source: questionnaire, 2015

18
Chart 4.3 Educational levels of the respondents

Educational level
90
80
70
60
50
40
percentage
30
20
10
0
et
e te te ee ov
e
pl tifca d ua egr ab
co
m
ce
r ra rd d
2 ag elo r an
e1 lo
m
ach te
ad op b as
gr di m

In reference to table 4.3, 80% of the respondents are with their Bachelor Degree,10% Masters
and above and also 10% Diploma graduate. Generally, majority of employees are bachelor
degree graduates. So the employees of the organization are at good educational level.

Table 4.4: Working experience of the respondents

Service year Number of respondents Percentage of responses

Up to 3 years 1 10%
3-6 years 2 20%
6-9 years 3 30%
Above 9 years 4 40%
Total 10 100%
Source: questionnaire, 2015

Chart 4.4: Working experience of the respondents

19
 work expriance
45

40

35

30

25 percentage

20

15

10

0
up to 3 yeard 3-6 years 6-9 years above 9 years

As indicated above in table4.4, 40% of the respondents have above 9 years of working
experience; 30% of the respondents have 6-9 years of experience, 20% of the respondents have
3-6 years of experience and the remaining 10% of the respondents have up to 3 years of working
experience in the organization. From this data or table we can understand that the organization
has employees with good amount of working experience.

4.2.2 Analysis of questions on salary

Table 4.5: payable of salary on time

No Number of respondents Percentage of respondents

Do you receive your salary on
time
Yes 9 90%
No 1 10%
Total 10 100%
Source: questionnaire, 2015

Chart 4.5: payable of salary on time

20
 Recive of salery on time
10
9
8
7
6
percentage
5
4
3
2
1
0
yes no

As indicated in table 4.5, 90% of respondents have replied that in Yirgalem Ethio Telecom
payroll prepared on time. This shows that payroll delay cannot more purposely affect employee’s
motivation to do well in organization. However, 10% of respondents say that payroll cannot pay
on time. The payroll delay problem affects the regional offices workers.

Few employees have tried to contact the concerned department at regional offices. The reason
was to check why payroll delay. From there great deal of them had the reason for payroll delay
which extends, or trace back to the head office.

Additionally, these individuals have considered that they do not know any time when concerned
department rejected their problem of employees, but could help them. This because of
centralized payroll system the authority is not delegated to regional offices in payroll
preparation.

21
4.2.3Analysis on centralized payroll related questions

Table 4.6: Advantage of centralized payroll system

Item Number of respondents Percentage of responses

Advantage
Yes 8 80%
No 2 20%
Total 10 100%
Source: questionnaire, 2015

Chart4.6: Advantage of centralized payroll system

advantage of centralized payroll system

90

80

70

60

50 percentage

40

30

20

10

0
yes no

From table 4.6 we can understand that, 80% of respondents believe that centralized payroll
system has advantage for organization. 20% of respondents said that centralized payroll system
does not have advantage for organization. Majority of the respondents agree on the advantage of
the centralized payroll system this implies that centralized payroll system is advantages for the
organization.

22
The head of the human resource department agreed that the centralized payroll has so many
advantages and he explains the reasons: all postings are made at the center and all subsidiary
ledgers are made centrally so it saves time and reduce man power involvement.

The head explains the special characteristics that the centralized payroll system differs from the
decentralized payroll system one as the following:

 It reduce payroll related costs

 Man power is decreased since it is automation
 Decrease workload at the sector
 Saves time

Table 4.7: Workload versus Non- Workload in payroll section

No Number of respondents Percentage of response

Workload 1 10%
Non workload 9 90%
Total 10 100%
Source: questionnaire, 2015

Chart 4.7: Workload versus Non- Workload in payroll section

work load of the region

100
90
80
70
60 percentage
50
40
30
20
10
0
workload non work load

23
In reference to table 4.7, we can understand that 10% of respondents say that there is a workload
in payroll section during payroll run for regions and zones. But the rest 90% says, there is no
workload on payroll section.

The head of the human resource department strongly agreed that there is no workload. He also
explains the reason for the reduction of work load at the section, that is, every data inputs is
captured in all zones and regions. The only work at the center is to run the payroll after they
received confirmation from all zones and regions about the data capturing.

4.2.4Analyses on forestation of workers and computerized payroll system

Table 4.8: Number of frustrated versus non- frustrated employees.

Number of frustrated and non- Number of respondents Percentage responses

frustrated employee
Frustrated 3 30%
Non – frustrated 7 70%
Total 10 100%
Source: questionnaire, 2015

Chart 4.8 percentages of frustrated and non frustrated employees

frastration of employees
90

80

70

60

50 percentage

40

30

20

10

0
frastrated non frastrated

24
As we can see in table 4.8, Non frustrated respondents concentrated in the table is greater than
frustrated employees. Thus non frustrated respondent’s ranges up to 70% and 30% of
respondents are frustrated.

From total respondents 75% suggest that the organization or concerned parties not know the
Frustration because the error or irregularities is not occurring at the level of organization or
centralized payroll system authority is not delegated to regional offices in payroll preparation.
But 25% of respondents oppose the above respondent’s idea. Those respondents suggest that the
organization or concerned parties know that frustration that occur because of errors or
irregularities but have no power to solve rather to report for preparation bodies.

The department head said that sometimes they are facing problems since payroll inputs, are
captured from manual to the system in case when problems are occurred in capturing it and he
said that it is not easy to correct it after payroll run.

Table 4.9 Computerized payroll accounting system

Did your organization use Number of respondents Percentage of respondents

computerized payroll system
Yes 10 100%
No - -
Total 10 100
Source: questionnaire, 2015

Chart4.9 Computerized payroll accounting system

25
 computerized payroll system As
120 we
100 can
80 see
percentage
60 in
40 table
20

0
yes no
above we can understand that, the organization used computerized system. Most respondents
believe that there as a workload in payroll section in head office, which is located in Addis
Ababa.

Ethio Telecom employee computerized system called enterprise resource planning (ERP) which
is oracle system. The head of the department implies that, the employee’s salary is transferred to
bank at the end of the month. Example, for this month the salary is sent to bank on June 24. This
implies that it is possible to take the salary starting from this day. From this example we can
understand that there is no workload in payroll section because the salary is sent to the bank six
days before the end of the month. To solve the problem the head suggested that more
computerized system is used.

26
CHAPTER FIVE

CONCCLUSION AND RECOMMENDATION

This chapter explains the conclusion based on the researcher findings discussed in the preceding
chapter and forwards recommendation based on conclusion drawn.

5.1. Conclusion

Based on information gathered from the respondents; the questioners and the interview we can
conclude that when the researcher asses the centralized payroll system in Ethio Telecom
Yirgalem branch, the centralized payroll system is effective for the operation of the organization
that is most of the respondents agreed that there is no work load in payroll section this is good
for the human resource department employees and the branch as a hole. In addition to this most
of the respondents agreed that they receive their salary on time this motivates the employees of
the organization to work hard because employees are sensitive on their salary. So centralized
payroll system has great advantage for the organization.

The researcher also concludes that the strength of the organization exceeds the weakness of the
organization in terms of using computer system; using centralized payroll system; having
educated man power; employing highly experienced manpower; and reduction of payroll delay.

Hence, the result indicates that the majority of the respondents are found in the productive age
category so it can help the organization to achieve its objectives and secure profits.

27
However, due to the application of centralized payroll system some of the regional office
workers suffer from payroll errors or irregularities. Repetitive payroll errors frustrate employees
and this frustration negatively affects the organization.

As researcher findings show workload in payroll at head office, which is located in Addis Ababa;
in adequacy of employees to process payroll data; communication gap between regional and
office and head offices are on the major problems identified in the study area.

5.2 Recommendations

In order to avoid the problem payroll errors due centralized payroll system application and to
improve performance of the workers, the organization should give priority to the following
recommendations.

Regional offices suffer from payroll irregularities or errors. These frustrate employees. To
improve this condition the organization should apply one of the given solution; increased number
of employees to process payroll data, reduction of communication gap between head offices and
regional office and decentralizing payroll system.

As the result of centralization payroll system employees suggested that there was workload in
head office in payroll department. The cause of every problem in this research is from thee and a
department to find and solve employee’s problem should be established there. The organization
should believe that the employees are its resources. So, treating their complaints and problems is
its responsibility.

In addition to the above recommendations, for large organizations like Ethio telecom it is
advisable to use centralized payroll system on their organization. Because the advantage of
centralized payroll system is bold rather than the decentralized payroll system. So the researcher
highly recommends that large corporations to use centralized and computerized payroll system

28
Reference
Carl S, warren, Phillips E, fees, James M, Reeve, 1996, Accounting principles, 18 th edition by
Thomason south western co cinannati; ohio

Carse Timothy F and Slater Jeffrey 1995-1996, 7thedition, payroll accounting approach, Irwin
(Chicago)

Conjecture Corporation, accessed date on 22/04/2013)

Fess and Warren (1995), accounting principle, 16th edition by Irwin Inc

Harvard College: international Regulatory completion, externalization and jurisdiction.

http//www.accounting tools.com/consolidate-payroll-systems accessed on 13/04/2013

http//www.ehow.com.accessed date 13/04/2013

http//www.portfolioparoll.co.uk/payroll-accoun

Ivancelwch (1989), Human resource management 7th edition by cralgs.Beyties MC Graw hill

29
 Appendix
Hawassa University

College of business and Economics

Department of Accounting and Finance

Dear respondent! The main objective of this questionnaire is to collect data for conducting a
research titled “The assessment of centralized payroll system on yirgalem Ethio Telecom” in
partial fulfillment of the requirements for the award of bachelor degree in accounting and
finance. Your response is important as it is the basis for the success of the research. So, please
provide me with true and correct answers. The information collected in this questionnaire will be
kept confidentially. Lastly, you may tick the box () that corresponds to your correct answer and
write down your answers to the open-ended questions in the space provided.

Part one: personal profile.

1. Sex: male female

2. Age in years A. up to 25 B. 25-35 C. 35-45 D. above 45

3. Educational status: A. Grade 12 complete B. Certificate

C. Diploma graduate D. Bachelor Degree

E, Master’s degree and above

4. Work experience in the organization A. up to 3 years B.3-6 years

C. 6-9 years D. above 9 year

Part two: Questionnaire

5. Do you receive your salary on time?

Yes No

6. If your answer to question number “5” is NO then what was the reason for delay?

A. Shortage of immediate cash B. Payroll

30
C. Other reason
pleasesspecify__________________________________________________________________
______________________________________________________________.

7. If the answer to the question number “6” is payroll delay, then did you and your colleagues try
to contact the concerned bodies” like budget and disbursement department”

A.Yes B. No

8. In question number “7” if the answer is NO what is the reason behind?

A. Is it, no need to contact B. Not ready to answer

C. You get bored asking

D. other reason
______________________________________________________________________________
______________________________________________________.

9. If your answer to question no “8” is YES what was the reasons?

______________________________________________________________________________
____________________________________________________________________.

10. Are you frustrated to work hard for payroll irregularities the reason for frustration?
A.Yes B. No

11. If yes, did the organization or concerned parties know that frustration?

A. Yes B. No

12. Is there a workload in payroll section at the center?

A. Yes B. No

13. Do you think that the centralized payroll system has advantage for your organization?

A. yes B. No

14. Does your organization employ computerized payroll accounting system?

31
A. yes B. No

Interview questions

1. Does the centralized payroll system have advantage for your organization? Explain
2. Are there any problems you have faced in relation to the centralized payroll? Explain
3. Is there a workload in payroll section at the center? Explain
4. What makes special the centralized payroll system than decentralized payroll system?
5. Does your organization employ computerized payroll accounting system?

32