Cash Payments
Cash
Payments
Though cash payments are still used, this practice tends to be
limited to day laborers who work for short periods. It is not a recommended
payment approach, as it requires a considerable amount of labor to calculate and
distribute cash; it also presents a high risk that the large quantities of cash on hand for payroll may be stolen. To
make cash payments, follow these steps:
-
Calculate the amount of gross pay, deductions, and net pay
due to each employee. This can be calculated manually or through the use of
payroll software.
-
Write a check to the local bank for the total amount of the
payroll that will be paid in cash. This check will be converted into cash.
-
Determine the exact amount of bills and coins required to
pay each employee; the form used in Exhibit 9.2 can assist in this process. To use the form,
list the net pay due to each person in the second column, then work across the
form from left to right, listing the number of the largest denominations
allowable that will pay each person. For example, to determine the exact number
of bills and coins required to pay the first person in the form, John Anderson,
determine the maximum number of $20 bills that can be used, which is six. His
net pay is $129.12, so six $20 bills will reduce the remainder to $9.12. The
next largest useable denomination is the $5 bill, of which one can be used,
followed by four $1 bills. This leaves coinage, of which one dime and two
pennies are required to complete the payment. Then cross-foot the form to ensure
that the bills and coinage for all employees add up to the total amount of the
check that will be cashed at the bank.
Exhibit 9.2: Payroll
Bill and Coin Requirements Form
-
Highlight the totals row on the form. Take the completed
form to the bank, along with the check, and requisition the correct amount of
each type of currency.
-
Obtain a set of pay envelopes, which can be simple mailing
envelopes with a stamped, fill-in-the-blanks form on the outside. An example of
this stamp is shown in Exhibit 9.3.
This stamp separately lists the regular and
overtime hours worked, and then combines this information into a single total
earnings amount from which standard deductions are made, with the net pay figure
noted at the bottom. If there are other deductions, such as for employee
purchases, 401k deductions, and so on, the stamp can be altered to include these
items. Write the total earnings, deductions, and net pay in the spaces provided
(see the exhibit). This gives each employee a complete breakdown of how his or
her pay was calculated.
Exhibit 9.3: Stamp
for Pay Envelope
-
When an employee takes receipt of his or her pay envelope,
there must be some evidence that the money has shifted into that person's
possession, to prevent later claims of not having been paid. This issue is
readily solved by creating a pay receipt, an example of which is shown in Exhibit 9.4. This receipt allows you to manually list the
name of each employee and the amount of money paid. Each employee must sign this
document at the time of cash receipt. It is also useful to have them enter the
date on which they received the cash, as evidence against claims that monies
were paid out later than the state-mandated date.
Exhibit 9.4: Pay Receipt
The main problem with the form shown in Exhibit 9.4 is that each employee signing the receipt can
see the net amount paid to every other employee on the list, which breaches the
confidentiality of employee pay rates. If
this is a problem, use a separate pay receipt page for each employee.
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