Payal Polyplast Pvt. Ltd.
Draft Internal Audit Report
HR & Payroll
STRICTLY PRIVATE & CONFIDENTIAL
Not for further distribution without express written permission of Grant Thornton Bharat LLP
© 2024 Grant Thornton Bharat LLP. All rights reserved.
Contents
Section 1 – Scope & Background
Section 2 – Summary of Audit Observations
Section 3 – Detailed Observations
Section 4 – Disclaimer
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I. Scope & Background
3
Scope Areas
S. No. Scope Areas Illustrative sub process
• Employee Master and Payroll Master Review
• Employee Code Creation and approval mechanism
1 Master Management
• Access to Employee & Payroll Master and change management
• Flagging of Employees left the company
• EPF/ESI Compliances
• Labour Laws
2 Compliances
• Professional tax and bonus act compliances
• Factory Act Compliance - Labour Law
• Training Schedules vs Actuals
3 Training
• Training Attendance - Mandatory and feedback process
• Budget vs Actual
• Background Verification including referral checks.
4 Recruitment Process • Interview Process.
• Approvals for hiring and compensation
• Employee onboarding and induction process
• No Dues Certificates application and approvals
• Notice Period requirement
5 Full & Final
• F&F Settlement timelines and adherences
• Calculation of F&F dues (including recovery)
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Scope Areas
S. No. Scope Areas Illustrative sub process
• Schedule of loans and Advances to employees
• Adjustment process and controls
6 Loans and advances
• Reconciliation for loan account
• Loan and Advances disbursement criteria and adherence
• System logic of salary processing
• Attendance monitoring
• Leave calculation and adjustment
7 Salary Processing • TDS deduction controls -investment declaration
• Monthly reconciliation -Salary disbursement Statement vs Actual as per Bank
Statement
• Admin and Canteen Related deductions
• Retirement Benefits
• Gratuity and EPF/ESI computation
8 Other Benefits
• Expense reimbursement policy and controls
• Leaves Encashment Policy
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Summary of Audit Observations
6
Observation Summary
Audit Observations H M L PD OI SL
1 Provident Fund a a
2 Non-Compliance with Code on Wages, 2019 a a
3 No workshops conducted for POSH a a
4 No exceptional approval for providing loan exceeding the eligibility criteria a a
5 Incorrect attendance charged by contractor a a
PD – Process Deficiency OI – Operational Inefficiency SL – System Limitation
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Detailed Observations
8
PD OI SL
1. Non-compliance to Employees' Provident Funds and Miscellaneous
High
Provisions Act, 1952
Observation Risks
Background: • Possibility of fines and penalties being levied due to non-
Under the Employees' Provident Funds and Miscellaneous Provisions Act, 1952, the employer compliance with the defined provisions
must deduct PF from employees' salaries and deposit it within 15 days after the month’s end. The
primary employer is liable for contributions, even if a contractor fails to comply. PF must be Root Causes
deducted for employees earning below the specified threshold unless they submit an opt-out
declaration. • Lack of communication and follow-up with the vendor
regarding timely and accurate PF deposits.
• Non – monitoring of PF deduction and deposition
Observation:
A. Delay in deposition of PF by contractor: During the review of vendor compliances, it was Recommendations
noted that 2 vendors providing security services and 1 vendor providing manpower services
made provident fund contributions with a delay ranging from 1 to 14 days • Compliance timelines to be monitored for vendors
• Penalty to be imposed on vendor in case of non-
compliance
Type of Due Date of Actual Date of
Name of contractor Month Delay
contrator depositing PF depositing PF
Management Comments
Manpower
M/s Sharnam Manpower April'24 15-May-24 29-May-24 14
services Sharnam: PF remittance got delayed in May'24 by 14 days,
Plant team had been advised to strictly follow the timeline in
Sep'23 15-Oct-23 17-Oct-23 2
future.
Super Industrial Service Security services
Super: Remittance is reflecting late by 2 day in Oct'23 due to
Feb'24 15-Mar-24 20-Mar-24 5
bank server and 5 days delay due to late deposit. Plant
team has been advised to strictly follow the timeline.
Feb'24 15-Mar-24 26-Mar-24 11
Saurav Boiler Services Security services
Saurav: There has been delays in Mar'24 & May'24 by 11
April'24 15-May-24 23-May-24 8 days & 8 days due to net-banking error.
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PD OI SL
2. Non-Compliance to Factories Act High
Observation Risks
Background: • Legal penalties, fines, and potential litigation against the
As per Sec. 52 of Factories Act, worker in a factory is not allowed to work constantly for more than company and the vendors.
10 days without a Compulsory Holiday (weekly off), Factories Act.
Root Causes
Observation: • Inadequate scheduling and lack of proper management of
In April 2024, noted 31 instances wherein contractual laborers employed by Sai Krupa worked rest days for employees
continuously for more than 10 continuous days. (up to 30 days in a month)
For details refer sheet 2 in Annexure.
Recommendations
• Implement a structured work schedule that ensures all
employees receive at least one rest day per week, in
compliance with statutory regulations.
Management Comments
Point is in discussion with Mgmt.
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PD OI SL
3. No workshops conducted for POSH at HO Medium
Observation Risks
Background: • Failure to conduct POSH workshops may lead to non-
Section 19(c) of the POSH Act, 2013 requires employers to organize regular workshops and compliance with the POSH Act, 2013, and increased
awareness programs to sensitize employees about the Act's provisions and provide orientation for vulnerability to sexual harassment incidents
Internal Committee members. As per Section 26(1)(c), employers who contravene or attempt to
contravene the Act or its rules may face a fine up to INR 50,000.
Root Causes
• Lack of proper planning and prioritization of POSH
Observation: training programs for employees
No sexual harassment workshops conducted:
Upon reviewing the training calendar, it was noted that no workshops to raise awareness about the Recommendations
provisions of the POSH Act were conducted for employees at the HO during FY 2024 • Develop a structured plan to prioritize and schedule
regular POSH training programs for employees to ensure
compliance and awareness
Management Comments
No comment provided
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PD OI SL
4. No exceptional approval for extending loan period Medium
Observation Risks
Background: • Non-recovery of excess loan
As per the "Temporary Financial Support to Staff Employees" policy (Clause 3.2.0), employees with
over 5 years of service are eligible for a loan of 3 months' gross salary, to be repaid in 12
installments. Any deviation from the policy requires approval from the MD/CEO. Root Causes
• Absence of process to document exceptional approvals
Observation:
On review of 7 samples, noted 1 instance wherein loan was provided for a period higher than the
policy, however, no exceptional approved was obtained by the MD / CEO.
Recommendations
Emp. Code PG-2503 • Exceptional approval to be obtained in case of any
deviation
Loan Period (In months) 24
Eligible Period as per policy (In
12
months)
Management Comments
For Details Refer sheet 3 in Annexure. The loan amount Rs. 2.50 Lacs has been sanctioned as per
the policy, loan recovery tenure 24 months has been
discussed and consensus taken from the senior
management, missed to document it.
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PD OI SL
5. Incorrect attendance charged by contractor Low
Observation Risks
Background: • Possibility of incorrect invoices processed
The security at the plant gate records the attendance of contractual laborers which is utilized by
Plant HR for preparation of attendance and wage sheet.
Under the Code on Wages, 2019, employers must ensure accurate and timely payment of wages, Root Causes
consolidating several wage-related laws, including the Payment of Wages Act, 1936 • Manual calculation or data entry errors in the attendance
register
Observation: • Inadequate maker checker mechanism for processing of
In April 2024, 4 instances were noted wherein Sai Krupa's attendance register reflected 11 days invoice
higher than the invoice leading to short payment amounting to INR 0.52 lacs.
Recommendations
For Details Refer sheet 6 in Annexure. • Maker checker mechanism to be established at the time
of processing invoices
• Biometric system to be explored
Management Comments
Attendance for contractual workers are taken into records
based on the approved attendance received from the HODs
of the sections. Records from plant gate is for the reference
of the headcount and not for the purpose of wages sheet/
salary calculation.
Further, we have finalized digital attendance machine and
about to get the same installed at plant to ensure 100
percent accuracy in attendance.
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Thank You
14
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