Culture &

Engagement
Arab Academy – HRM
2021-2022
Dr. Amany Shehata
 Learning activities

Mid Term Group Personal

Final Exam
Paper Presentation Contribution
(40 points)
(30 points) (20 points) (10 points)

Schedule From 9:00 am – 12:00pm

Schedule & 11/05/22 lecture 15/06/22 lecture

18/05/22 lecture 22/06/22 lecture
Ratings 25/05/22 lecture/Pres 1 29/06/22 lecture/Pres 2 online
01/06/22 lecture/Pres 1 Sat 25/6/22 Lecture /Online
08/06/22 lecture/Mid term paper 06/07/22 Revision/Final Exam

HRM-Arab Academy-Dr.Amany Shehata 2

 1. Culture & Engagement

2. Industrial Relation-
Administration & Operations
(Shared services) – HR Analytics
& Managing Data analysis

3. Revision
Remaining
Sessions 4. Exam

HRM-Arab Academy-Dr.Amany Shehata 3

 1. Culture & Engagement
2. Industrial Relation & Personnel

Agenda 3. Payroll & Personnel cycle

4. Social insurance
5. HR Shared services
6. HR analytics & reporting

HRM-Arab Academy-Dr.Amany Shehata 4

  Culture can influence every part of an organization, including the
strategy process

 Thus, culture is important in both the strategic analysis and

Why is “doing” the strategy stages

organizational The culture of any group of people is that set of beliefs, customs,
practices and ways of thinking that they have come to share with
culture each other through being and working together.

important? - Stacey
Organizational
Culture

6
 What can you readily identify, but
can’t accurately define?
What does every great business
have that other competitors do
not?
What is it makes a business into a
cult?
It’s the culture
Organizational
Culture

7
  The shared values and norms in an organization that are
taught to incoming employees.
 It involves common beliefs and feelings, regularities in
behavior, historical process for transmitting values and
norms

“The way we do things around here”

 There are three ways to do things around here:

1. The right way.
2. The wrong way
Organizational 3. Our way (the company way).
Culture

The way we do things

around here
8
  The trick that many organizations have missed is that shared
behavior in organizations (culture) does not come because they
teach people how to behave in a particular way. The behavior
comes as a consequence of a number of different drivers.

 These drivers include:

1. Reward systems;

2. The way that winners and losers are defined and treated;

3. The examples that are provided by influential managers,

and where they place their emphasis;

4. The nature of the work, and the degree to which tasks are
Organizational
mechanized;
Culture
5. The structure.

9
 Working with behavior alone is unlikely to produce any
sustainable change.

 It is the drivers that influence behavior.

 If you want to change behavior, change the drivers.

 As a part of the strategic planning process, it is essential

to understand how the organizational culture influences
results today, and what limits it might put on your
capacity to change the future.

 There are two characteristics that have a big impact on

culture: Fear and Freedom

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  Fear is a primary driver of human behavior.

 To a greater or lesser extent we are all defined by our fear.

 Add a little fear into an organization and people stop taking

chances, spend more time diluting responsibility in meetings,
and introduce lots of checking steps.

 If the fear persists for years, then people become increasingly

uncomfortable with even minor change.

 Build an organization with low levels of fear and you will see the
opposite.
Fear  Here you will find creativity, limited use of hierarchy to get
things done, all kinds of attempts to make changes, and
probably some genuine breakthroughs.

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  You can measure the fear level using the following questions:
1. What are people afraid of in this organization (losing their jobs,
making mistakes, not getting pay increase, their managers. etc)?

2. How rational is that fear?

3. How does that fear affect their behavior?

4. To what extent have the current managers developed this fear?

Fear

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  People need to have freedom to work within fairly broad
guidelines so that they can get the required outcomes.

 To be able to confer this freedom, an organization needs

to be confident it has the right people, the right
information systems to support their decision making
process and the right feedback system to ensure that
every thing does not go of the rails.

 When people have this freedom, then the organization

Freedom finds ways around day-to-day problems and it is able to
cater for new challenges and opportunities.

13
 Fear
Low

freedom

Low High

Fear-
freedom High
Matrix
  Low fear + High freedom = innovative, accepting of change,
experimental.

 Low fear + Low freedom = frustration, challenge of authority, rules will

be broken.

 High fear + High freedom = upward delegation, meetings to share

Fear- decisions, low innovation.

freedom  High fear + Low freedom = dependence on rules and precedents,

Matrix resistance to change.

15
  Rituals and stories play key roles
in maintaining organizational
cultures

 Stories or myths may convey

beliefs of company’s founder, or
Organizational other major values
Culture (Cont.)

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  Beliefs and values of the organization’s founder
 Societal norms of firm’s native/host country
 Problems of external adaptation and survival
 Problems of internal integration

Creation of
Organizational
Culture

17
Organizational
Culture

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 - Visible objects, actions, stories that represent the
culture
- Most easily changed
- Rites, rituals, ceremonies
- Stories, myths, legends
- Symbols
- Language/jargon/gestures

Artifacts/
Symbols

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 - Shared ways of interacting, approaching a task
- Shared ways of responding to something new

Behavior
Patterns

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  Socially constructed preferences
- Group expectations about how
things should be done

Norms

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  Preferred states
Values  Feelings & beliefs about what’s good or right

22
 Shared
Assumptions - Taken for granted
- Not conscious
- Hard to change

23
  Research on pace of life in various countries suggest that
Westerners have fairly precise measures of time and a stronger
concern for punctuality than most other people
 Mono-chronic style individuals focus on one thing at a time;
characteristic of USA
 Poly-chronic style individuals focus on several things at one time;
characteristics of Latin American countries

Cultural
Differences

24
  Research has shown that countries differ significantly in
 Interpersonal trust

 Power-distance

 Avoidance of uncertainty

 Individualism vs. Collectivism

 Men vs. women.

Dimensions of
Cultural
Differences

25
  Few people rush into business
 Men and women congregate into separate groups
at social functions
 Latin Americans stand more closely to each other
than North Americans when in conversation
 Men may embrace

Doing Business
in Latin
America

26
  Guests are expected to arrive late, with exception of
American guests
 Little concern about deadlines
 Machismo - expectation that businessmen will display
forcefulness, self-confidence, leadership with flourish
 Fatalism

Doing Business
in Latin
America

27
  Japan, Korea, China
 Meetings devoted to pleasantries; serving tea,
engaging in chitchat
 Seniors and elders command respect
 Consciously use slow down techniques as
bargaining ploys
 Business cards should be bilingual
Doing Business
in East Asia

28
  Protocol-conscious
 Do business only with highest ranking
executives
 Appear stiff and dull
 More expressive in private than in public
 Hard to draw up contracts due to language
barriers
 Have no advertising experience

Doing Business
in Russia

29
  Prefer to act through trusted third parties
 Personal honor given high premium
 Fatalism
 Emotionally expressive
 Intense eye contact
 Guests should avoid discussing politics,
religion, host’s family and personal professions

Doing Business
in Middle East

30
  Rose Knotts summarized important cultural differences between U.S. and foreign
managers as follow:
1. Americans place an exceptionally high priority on time, viewing time as an asset.
Many foreigners place more worth on relationships. This difference results in
foreign mangers often viewing U.S. managers as “more interested in business
than people”.

2. Personal touching and distance norms differ around the world. Americans
generally stand three feet from each other in carrying on business
Some important conversations, but Arabs and Africans stand about one foot apart. Touching
culture another person with the left hand in business dealings is taboo in some
differences
countries. Americans managers need to learn personal rules of foreign managers
with whom they interact in business.

31
 3. People in some cultures do not place the same significance on material wealth
as Americans often do. Lists of the “largest corporations” and “highest paid”
executives abound in the untied states. “More is better” and “Bigger is better” in the

united states, but not everywhere else. This can be a consideration in trying to
motivate individuals in other countries.

4. Family roles and relationships vary in different countries. For example, males
are viewed more than females in some cultures, and peer pressure, work situations,
Some and business interactions reinforce this phenomenon.
important
culture
differences

32
 5. Language differs dramatically across countries, even countries where people speak the
language. Words and expressions commonly used in one country may be greedy or
disrespectful in another.

6. Business and daily life in some societies is governed by religious factors. Prayer times,
holidays, daily events, and dietary restrictions, for example, need to be respected by
American managers not familiar with these practices in some countries.

7. Time spent with family and quality of relationships are more important in some

Some important cultures than the personal achievement and accomplishments espoused by the

culture differences traditional American managers. For example, where a person is in the hierarchy of a
firm’s organizational structure, how large the firm is, and where the firm is located are
much more important factors to American managers than to many foreign managers.

33
 1.waving is a serious insult in Greece and Nigeria, particularly in the
hand is near someone’s face.
2.Making a “good bye’ wave in Europe can mean “NO,” but means
“come here” in Peru.
3.In China, last names are written first.
4.A man named Carlos Lopez-Garcia should be addressed Mr. Lopez in
Latin America, but as Mr. Garcia in Brazil.
5.Breakfast meetings are considered uncivilized in most foreign
countries.
Cultural pitfalls
that you should 6.Latin Americans average being twenty minutes late to business
appointments.
know

34
 7. Direct eye contact is impolite in Japan.

8.Don’t cross your legs in Arab or many Asian countries, it is rude to show the
sole of your shoe.

9.In Brazil, touching your thumb and first finger –an American OK sign- is the
equivalent to raising your middle finger.

10.Nodding or tossing your head back in southern Italy, Malta, Greece, and
Tunisia means “no.” In India, this body motions means “yes.”

Cultural pitfalls 11.Snapping your fingers is vulgar in France and Beligum.

that you should
know

35
 12.Folding your arms across your chest is a sign of annoyance in Finland.

13.In China, leave some food on your plate to show that your host was very so
generous that you couldn't finish.

14.Do not eat with your left hand when dinning with clients form Malaysia or
India.

15.One form of communication works the same worldwide. It is the smile, so

Cultural pitfalls that take that along wherever you go.
you should know

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 People, corporate cultures,
Environment labour policies,
international issues.

Cultural factors History? Size?

specific to organisation Products and technology?
Leadership? Cultural Web?

Power? Role?
Identification of cultural style
Task? Personal?
Analysing of the organisation
organisational Prescriptive or emergent?
culture-1 Analysis of the strategic
Competitive advantage?
Core competence? Miles and
implications
Snow Culture types
(Defenders, Prospectors,
Analyzers, Reactors?)
 Organisational culture: “Beliefs, values and learned ways of
managing”
 Important to distinguish between organisational and
national/international culture
 Analyse organisational culture through these main elements:
 History and ownership
 Size
 Technology
Leadership and mission
Analysing

 Cultural Web - developed by Johnson
organisational  Cultural Typologies – Handy
 Culture types – Miles and Snow
culture-2
 Stories
Symbols

Rituals
Paradigm
Power
Structure

Control Organizational
Systems Structures

Identifying
Organizational Paradigm= worldview, it determines how the organization will behave
Culture: Cultural In a given situation
Web (Johnson)
  Handy classified organizational cultures into 4 types:
- Power Cultures
- Role Cultures
- Task Cultures
- Person Cultures
Cultural
Typologies
(Handy)
  Power culture – dominated by one very powerful person or small
group and decisions are very centralized
 Role culture – Found in established organizations in stable
environments, with hierarchical structures, i.e. very bureaucratic

Cultural
Typologies
(Handy)
  Task culture – Found in organizations involved in non-repetitive
activities
 Person culture – Found in organizations that exist primarily for the
benefit of the members of the organization

Cultural
Typologies
(Handy)
  The analysis of culture should be more than
just a list of factors describing culture
 The analysis process should be done with
reference to possible areas of strategic interest
 I.e., the analysis should include testing for
whether the culture is a strategic fit with the
current strategy
Analysis/Testing
For Strategic Fit
  How old is the organization? Does it exist in a stable or fast-
changing environment?
 Who owns it and what is the structure?
 How is it organized?
 How are results judged?
 How are decisions made?
 What qualities make a good boss? A good employee?
Ten Guidelines for  How are people rewarded?
Analyzing culture  How are groups and individuals controlled?
and its meaning  Do people work in teams or as individuals?
for strategy
  Defender:
 protect market share
 hold current position
 Analyser:
 seek market opportunities but protect existing areas
 hold market share but with some innovation
Four strategic  Prospector:
types and their  find new opportunities
 exploit and take risks
approaches to
strategy (Miles  Reactor:
 respond only to others
and Snow)  often late and inadequate
  Risk – Does the organization wish to change its
level of risk?
 Rewards – What reward and job satisfaction?
 Change – High or low degree of change
needed?
 Cost reduction – Is the organization seeking
Testing for major cost reductions?
Strategic Fit  Competitive advantage – Are significant new
advantages likely or will they be needed?
 International culture:

“The collective programming of the mind which

distinguishes the members of one human
group from another...Culture, in this sense,
includes the system of values; and values
International amount to the building blocks of culture.”
cultural - Hofstede
perspectives-1
 Hofstede’s five dimensions of culture:
 Power distance: the extent to which those who are poorest in
society are willing to accept their position
 Individualism/collectivism: the extent to which societies are
collections of individuals or are bound together into a cohesive
whole
 Masculinity/feminity: masculine societies see a sharp distinction in
roles between the sexes: female societies see more equality
 Uncertainty avoidance: the extent to which members of a culture
International feel threatened by the unknown
cultural  Confucian versus dynamism: long-term outlook versus living for
today
perspectives-2
HR Back office
Personnel, Payroll, Industrial Relations

49
  Personnel management and industrial relations are two related concepts
that deal with various aspects of the relationship between the management
of organizations and their employees as well as the relationship between
other parties with a vested interest, such as labor unions. The main
difference between personnel management and industrial relations is that
while personnel management is more focused on the recruitment, training
and proper relations with employees, industrial relations is more concerned
with trade unions and other forms of organized labor, in relation to
employment issues. In that sense, it can be said that the relationship
between personnel management and industrial relations is the shared
concern for the welfare of employees and other forms of labor.
 It is here that another link between personnel management and industrial
relations can be seen, because management must also introduce standards
What Is the Relationship to ensure that the welfare of employees are met. Failure to do so may lead
between Personnel to actions against the management of the company, either by the
Management and Industrial employees on their own or by the various trade unions or labor unions as
Relations? part of industrial relations. Where the management and labor are able to
successfully resolve the issue by coming to a mutually beneficial
understanding, then the cordial industrial relationship is restored.

50
 Assuming the company and the labor unions cannot come to some sort of
understanding or compromise, then there is a situation that is referred to as
a break down in industrial relations.

Usually, the personnel management will be the main department to handle

the dispute with labor or unions. Personnel management will also be the
department to take proactive steps to ensure that such situations do not
come up, and also to try and make certain that any such incidence that does
What Is the Relationship occur is attended to so as to prevent any form of escalation. Part of the
between Personnel process of making sure that such rifts do not arise include ensuring that the
Management and organization adheres to the applicable labor laws for that industry and also
Industrial Relations? that they treat their employees in an equitable manner.

51
  Most of us think we know what industrial relations are.
 It is a field that analyzes the factors that affect the workplace.
 However, it is the workplace that directly affects our style of
living and even our culture in a lot of ways.
 There is another related concept called employee relations that
confuses many because of its similarities with industrial
relations. It is a fact that looking at a workplace from the
perspective of workers unions is no longer relevant in these
times. Let us see if there is any difference between these two
related concepts.
Industrial Relations vs
Employee Relations

52
 Industrial Relations

The field of study that covers employment relationships in their

entirety is called industrial relations. In general, it is believed to be
the study of relations between the employees and employers.
There are a multitude of factors at play at the workplace that shape
up the relations between workers, employers, and the government.
The field of industrial relations came into existence with the advent
of the industrial revolution as an important tool to understand the
complex relations between employers and employees. There are
Industrial many different ways to look at industrial relations as there are the
perspectives of workers, employers, government, and the
Relations vs perspective of the society.
Employee If you are a worker, you would obviously associate industrial
Relations relations with better wages, safety at workplace, job security, and
training at workplace. On the other hand, industrial relations for an
employer are all about productivity, conflict resolution and
employment laws.

53
 Employee Relations

‘Employee relations’ is a concept that is being preferred over the

older industrial relations because of the realization that there is much
more at the workplace than industrial relations could look or cover.
In general, employee relations can be considered to be a study of
relations between employees as well as employer and employees so
as to find ways of resolving conflicts and to help in improving
productivity of the organization by increasing motivation and morale
of the workers.
The field is concerned with providing information to employees
Industrial regarding the goals of the organization so that they have a better
Relations vs understanding of the aims and policies of the management.

Employee Employees are also informed about their poor performances and
ways and means to correct performance. Employee relations also
Relations take care of grievances and the problems of the employees and let
them know all about their rights and what to do in case of
discrimination.

54
 What is the difference between Industrial Relations and
Employee Relations?

Though it was industrial relations that came into existence earlier,

it is employee relations that is increasingly being used to refer to
workplace relations these days.
 Falling union memberships around the world have made people
realize that relations between employers and employees are more
important than the focus given to these relations by industrial
Industrial relations.
Relations vs It is human beings called employees that form the backbone of all
Employee operations in an organization and the study of relations between
employees and employees and employers are more important
Relations than the laws and institutions that govern relations at the
workplace.

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 LEARNING OBJECTIVES

1.         Describe the related documents applicable to the payroll and

personnel cycle.
2.         Understand the assertions of auditing the payroll and
personnel.
3.         Determine and apply the internal controls in the payroll and
personnel cycle.
4.         Design tests of controls and assess related control risks over
the payroll and personnel cycle.
Payroll and 5.         Design analytical procedures for payroll and personnel cycle.
6.         Design substantive tests of transactions over the payroll and
Personnel Cycle personnel cycle.
7.         Design tests of details of balances for accounts in the payroll
and personnel cycle

56
 Documents and Records
1.1       Personnel records – a document that records an
employee’s data such as the date of employment, rates of pay,
authorized deductions, performance appraisal and termination of
employment, etc.
1.2       Deductions authorization form – a form signed by the
employee authorizing deduction from his wages or salaries for
contribution to superannuation plan, loan repayment or others.
Rate authorization form – a document authorizing the rate of
pay (per hour, day, month) of the employee by management, or,
in the case of top management, by the board of directors.
1.4       Time card – a document indicating the starting and the
ending time within which the worker works each day. It is usually
used for daily or hourly paid worker for calculating the total hours

Payroll and of work each day.

1.5       Job time card – a document indicating the particular job
on which the worker has spent on during a given period of time.

Personnel 1.6       Payroll cheque – It is usually issued for factory workers

whose wages are not fixed monthly.

Cycle
1.7       Bank transfer advice – a written advice to the
company’s bank showing the names of employees, their
respective monthly salaries, bank account numbers and the total
amount to be transferred from the company’s payroll account to
the employees’ accounts.
1.8       Payroll journal – a journal for posting total payroll
expense for the period to general ledger account.
1.9       Payslip/salary slip – a document prepared individually
for all employees for a particular week or month showing the
gross pay, deductions and net pay.
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 Control Risks Assessment of Payroll and Personnel Cycle
 
2.1       Importance of payroll and personnel cycle
2.1.1    The payroll and personnel cycle is important for several
reasons:
(a)        Salaries, wages and other staff costs are one of the major
expenses in most companies.
(b)        Labour cost is one of the components of inventory costs in
manufacturing and construction companies.
Payroll & (c)        The improper classification and allocation of labour cost
may have material misstatement of net income.
Personnel (d)        Significant resources can be lost because inefficiency or
are susceptible to fraud.
Cycle 2.2       Assertions used by the auditor in payroll and personnel
cycle

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  2.2.1    Classes of payroll transactions

Assertions Descriptions
1.   Occurrence Wages and salaries are only paid to non-
fictitious employees and for their work performed.

2.   Completeness All existing payroll transactions are recorded in the

payroll and accounting records.

3.   Accuracy Wages and salaries should be calculated based on work

performed and terms of employment.

4.   Cut-off Payroll transactions should be recorded in the correct

Payroll & period.
5.   Classification Payroll transactions should be properly classified.
Personnel Cycle

59
 2.2.2    Classes of payroll expenses and related accruals

Assertions Descriptions

1.   Existence Payroll expenses are valid and related accruals are valid liabilities.

2.   Rights and Recorded payroll expenses and related accruals are expenses and
obligations obligations of the entity.

3.   Completeness All payroll expenses and related accruals have been recorded.

Payroll & 4.   Valuation and Payroll expenses and related accruals are properly

Personnel allocation valued and allocated in accordance with accounting standards.

Cycle

60
 2.2.3    Payroll presentation and disclosure

Assertions Descriptions

1.   Rights and All disclosed transactions relating to payroll expense and related

obligations accruals have occurred and pertain to the entity.

2.   Completeness All payroll expenses and related accruals have been recorded in
the financial statements.

Payroll & 3.   Classifications Financial information relating to payroll expense and related

Personnel accruals is appropriately presented and disclosed.

Cycle 4.   Valuation and

allocation
Payroll expenses and related accruals are disclosed fairly and at
appropriate amounts.

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 2.3       Internal controls and test of controls
(Dec 09, Dec 11)
2.3.1    Examples of internal control procedures for payroll and personnel cycle are as follows:
Internal Control Procedures
Assertions
1.   Occurrence  Proper segregation of
duties between processing and personnel
functions; adequate personnel files are
maintained; and work/time record
are approved by person of appropriate level.
2.   Completeness  Updated record for starters and
leavers should be maintained by personnel
office and payroll processing function is
provided with updated information about
leavers.
3.   Accuracy  Internal verification to ensure that
the calculation of wages and salaries is in
agreement with records of work performed
and terms of employment.
4.   Cut-off  Notices of additions, terminations, and
changes in pay rates, and deductions
reported promptly to payroll processing
function.
5.   Classification  Proper internal verification and approval for 
accounts charged to payroll.
Test of control
 Observe and evaluate proper segregation of
duties; e.g. persons authorizing employee
benefits costs are not responsible for
recording.
 Check the authorization by appropriate for
all additions, changes and deletions of
personnel records and the authorization for
payments of employee benefit costs.
 Check the numerical sequence of the
time/work records and
the reconciliation of payroll summary and
starters and leavers recorded in personnel
records.
 Examine the client’s record to see whether
the client has checked the arithmetical
accuracy of employee benefit costs to ensure
the amounts are in accordance
with employment contracts.
 Examine indication of internal
verification and test procedures for
processing time/work record and for
recording liabilities.
Review client’s procedures and inspect their
records to verify there has been proper
classification of employee benefit costs.
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Substantive Procedures for Payroll and Personnel Transactions
4.1       Analytical procedures

4.1.1 EXAMPLES OF THE ANALYTICAL PROCEDURES FOR PAYROLL AND

PERSONNEL PAYMENTS

  (a)        Compare current-year balances in payroll expense account with prior

years’ balances after adjustment for changes and number of employees.
(b)        Compare payroll costs as a percentage of sales with prior years’ and industry
data.
(c)        Compare budgeted payroll expense with actual payroll expenses.
(d)        Compare current-year balances in payroll related accruals with prior
years’ balances after adjusting for changes in conditions.
(e)        Compare labour cost as a component of inventory cost with that of previous
years.
(f)        Estimate sales commissions by applying commission formulas to recorded
sales totals.
(g)        Test reasonableness of accrual balances.

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 4.2       Substantive procedures – payroll transactions
(Dec 13)
4.2.1    Examples of substantive tests for payroll transactions are as follows:
• 

Substantive procedures
Assertions
1.   Occurrence  Review the payroll summary, payroll journal and general
ledger for unusual items and check to the supporting documents.

2.   Completeness  Reconcile the total disbursement in the payroll journal with

the payments on the bank statement and cash disbursement
journal.
3.   Accuracy  Agree pay rates on the payroll summary with payroll record;
 examine evidence of internal verification; and
 recompute the mathematical accuracy of selected payroll
transactions.

4.   Cut-off  Compare dates of acknowledgement receipt by employees or bank

transfer to date of transaction in payroll journal.
5.   Classification  Select transactions from the payroll journal and check
their classification with chart of accounts.

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4.2.2    The main issue of internal controls over payroll and personnel cycle is the potential fraud of unauthorized
payments to fictitious employers or the payment of wages or salaries without work performed. The following audit
procedures are designed to identify this type of fraud.
(Jun 11)

Types of fraud
1.   Non-existence employees 
Substantive procedures
Tracing the selected transactions recorded in the payroll journal to the
personnel department to determine whether the employees were actually
employed during the payroll period.

2.   Terminated employees
 Selecting several files from the personnel records for employees who were
terminated in the current year to determine whether each received his or
her termination pay in accordance with company policy.
 Examining the payroll records in the subsequent period to ascertain that
the employee is no longer being paid.

3.   Unclaimed wages  Requesting a surprise payroll payoff where each employee must pick up and
sign for his or her cheque in the presence of a supervisor and the auditor.
 Investigating those unclaimed wages to determine whether an unclaimed
cheque is fraudulent.

4.   Fraudulent hours
 Reconciling the total hours paid according to the payroll record with
an independent record of the hours worked.
 Examining evidence of proper authorization for payroll since it is ordinarily
easier for the client to prevent this type of defalcation by adequate controls
than for the auditor to detect it.

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 4.3       Substantive procedures – payroll expense and accruals balances
 
Assertions Substantive procedures
1.   Existence  Vouch selected payroll accruals from payroll summary to
the supporting documents such as personnel file,
work/time record, etc.

2.   Rights and  Review supporting documents to determine that the

obligations entity has obligation to pay.
3.   Completeness  Search for unrecorded payroll liabilities and check
the calculation of commission payable or entitlement of
commission accrued against the terms of employment
and company policy.

4.   Valuation and  Test reasonableness of accrued payroll expenses and

allocation compare amounts accrued to supporting documents.
5.   Presentation and  Discuss with management and review benefit contracts
disclosures for proper disclosure of payroll accruals.

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 What’s new in the Law?

1. The Law unified the dispersed social insurance laws under one umbrella and made
all categories of persons subject to the same legislation.

 The Law replaced Law 179/1975 on Social Insurance (the “Old Social Insurance Law”), Law
108/1976 on Social Insurance for Employers and the like, Law 50/1978 on Social Insurance for
Egyptians working abroad, as well as various other regulations and decrees. This means that all
categories of insured persons will be subject to the new Law instead of these old scattered
laws.

2. The Law extended social insurance protection to new groups of employees

 These are primarily non-regular and seasonal employees or further categories of employers.
Examples include fishermen, overland transportation employees, domestic workers, owners of
small shares of real estate and owners of environmental, rural, and familial industries, as well as
owners of sole- person companies. These new categories would not affect most corporations.

Social 3. Subscription amounts have changed:

Insurance  The contribution rates/percentages to be deducted from the salaries of the insured persons
(employers and employees) have changed. The amounts of income on which the rates are
assessed have not been addressed by the Law but will be subject to the executive regulation to
be issued soon. These may change then. Accordingly, the effect as to the increase or decrease
of social insurance obligations on the concerned parties cannot be entirely assessed at this
stage.

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 Who pays the
Category Old Rate New Rate
subscription?
 26% on basic monthly
 18.25%([1])([2])([3]) on total
salary
monthly salary (incl.
Employers on behalf of basic and variable)
each employee  24% on additional or
variable elements per
Employees working in the  
month
private sector and the
public sector  14% on basic monthly
salary
 11% on total monthly
An employee on behalf
salary (incl. Basic and
himself/herself  11% on additional or variable)
variable elements per
month
25% from the monthly
 15% from the monthly 
Employers and The Employer or subscription income that
subscription income that
Entrepreneurs (including entrepreneur on behalf of the insured chooses (the
the insured chooses (a
shareholders) himself/herself maximum is not defined
maximum of EGP1,000).
yet).

Social Egyptian employees Each employee on behalf of  22.5% of the monthly  21% of the monthly

Insurance
working abroad himself/herself subscription income subscription income

Employees that fall under

 13% from the minimum
non-regular category Each worker on behalf of
 Didn’t exist limit of the monthly
(example domestic himself/herself
subscription salary.
workers)

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 [1] The subscription amount will increase by 1% each seven years up to 26%
for insurance on aging, disability, and life insurance. The increase will be
divided equally between the employer and the employee for regular
employees. This increase is applicable on all categories.

[2] The subscription paid by the employer for employees who are not yet
subject to the Universal Health Insurance Law will be 0.5% more until the
application extends to the employee’s governorate. Universal Health Insurance
is currently applied only in Port Said and will soon be applied in four other
governorates. These are Suez, Ismalia, South Sinai, and North Sinai. In all
cases, the 0.5% subscription amount will increase up to 1% depending on the
Social dangers that the employee is subject to and as per the forthcoming executive
regulation of the Law.
Insurance [3] Administrative bodies, such as ministries, will deduct 17% only. Public
sectors employers, such as, public sector companies will deduct 18%.

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 4. Retirement age under the Law:

 Similar to what has been applicable in the past, the Law set the retirement age for employees
and Egyptians working abroad at sixty years old. The Law also set the retirement age for
employers and non-regular employees at sixty-five years old. However, by 2040, the Law
stipulates that the retirement age for all categories will be sixty-five and shall increase
gradually until then. The Prime Minister will issue decrees stipulating the gradual increases.

5. Funding the social insurance system:

 A unified retirement fund will be established for all categories and all types of insurance. A
separate account will be made for each type of insurance. Under the Old Social Insurance
Law, there were two separate funds for civil servants and employees in the private sector.
They will now be transferred to the new fund.

6. Penalties under the Law:

Social Generally speaking,

Insurance
 all the penalties are greater than those in the Old Social Insurance Law for all violations. All
the penalties are now fines that range from EGP20,000 to EGP10,000; and

 the penalty of imprisonment has mostly been removed from the Law and is reserved to cases
of violations to the obligations toward injured employees and in case of some of the
violations by the social insurance officials.

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HR shared services

Understand the principles of shared services, how they

work, and the benefits they can bring to an organisation

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 HR shared services refers to concentrating administrative HR
activities into a centralised ‘hub’ within an organisation. They are
service-focused, enabling the customers of the shared service to
specify the level and nature of the service, and are therefore flexible to
the needs of the business. The origins of shared services come from
finance but there are many different models of providing centralised
services across an organisation (or sometimes, across several partner
organisations), for example, just HR, or across multiple services, for
example, finance, IT and HR.
A shared services approach is one way to organise activities within a
What is shared broader HR operating model. There’s no single model for delivering
services HR that’s suited to all organisations. An organisation should structure
its HR activities based upon its organisational strategy, wider
organisational structure and current business needs.

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 HR shared services typically provide routine administrative service
such as recruitment, new starters, leavers, payroll, changes to
roles/contracts, working time in organisations where relevant,
absences, or learning and development procurement. In some
organisations, services could range from lower-level administrative
duties to supplying specialist HR information and advice on HR policy
and practice. The exact nature of the service will vary between
employers.

Some organisations using HR shared services to drive value might

Scope of services also include more strategic services such as workforce planning. The
increasingly important role of people analytics could also see a greater
role for shared service teams who have extensive access to HR data.

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 HR shared services are typically organised around a number of
‘Tiers’:
 Tier 0 is typically a HR portal/intranet where employees and line
managers can ‘self-serve’.
 Tier 1 is a contact centre where employees and managers can
access the services provided via email or telephone.
 Tier 2 would have teams typically aligned to specialisms such as
recruitment, performance management, payroll and benefits,
administration etc.
 Some organisations have a Tier 3 ‘process owner’ with overall
Structure responsibility for a particular process area and can be a final
point of escalation. In organisations that have chosen to
outsource their shared services, the Tier 3 ‘process owner’ will
typically be internal and the model will include people focused
on vendor management.

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 The different tiers in an HR Shared Services provide common services such as:

 Payroll
 Employee data management
 Benefit and leave administration
 Relocation services (international and domestic)
 HRIS
 Recruiting operations
 Learning services
What are HR  Reporting and analytics
shared services?  and the HR service center.
HR shared services is a part of a multi-tiered HR service delivery model. It
enables the other parts of the HR department to focus on strategic initiatives.

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  HR becomes more strategic. The division of responsibilities frees up the more experienced HR

professionals to focus on strategy. This provides more opportunities to measure HR’s

performance through Human Capital metrics that align its success to the organization achieving

its strategic objectives. This is critical for HR to be a true business partner by contributing to the

development of the business strategy.  It ensures organizational business strategy has a strong

focus on people management and a positive employee experience.

 Consistency and compliance. HR matters are always handled in the same, consistent way,

which helps ensure that you’re compliant with rules and regulations. This leads to a better

Benefits of HR employee experience and to mitigation of risks within the organization.

shared services  Operational excellence. By assigning clear responsibilities for administrative processes,

organizations can reach operational excellence. This happens through streamlined processes

and optimized workflows. On top of providing a better HR service, operational excellence also

results in an improved employee experience and efficiency.

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  Improved employee experience. Employees get their issues
resolved and find relevant information quickly and conveniently.
This has a positive impact on their digital, as well as their overall 
employee experience. Employees have grown to expect all
systems to be engaging, to be easy to navigate, and to satisfy
their needs and expectations. This includes systems they
interact with at their jobs. If there is a gap between expectation
and experience, this leads to employee frustration.

Benefits of  Cost reduction. HR shared services can help organizations cut

HR shared costs in several ways. For example, you need less experienced
HR professionals to handle transactional HR services, which
services results in lower labor costs. What’s more, the efficiency achieved
through streamlining and simplifying services also helps reduce
costs.

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 Challenges of HR shared services
While HR shared services can help human resources achieve
operational excellence and enable the department to become
more strategic, putting it into action is not always straightforward.
There are several challenges organizations face.

Shared
Services

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 Human resource management is going through a massive change due
to an unexpected change in the working paradigms. Almost all the IT
companies have created HR policies enabling moving from co-working
to work from home (WFH) options for their employees, creating its
advantages and limitations. Optimising the performance and cost and
ensuring safety is the paramount need for most of these organizations.
There is enough evidence that HR analytics can bring substantial
benefits to the organization, from recruitment to customer engagement
to performance improvement [1]. However, the research also indicates
that only about 4% of the organizations are implementing HR analytics
Employee with success. Another similar research as shown in the below diagram
Efficiency with HR shows that about 86% of the organizations are implementing/planning
Analytics Maturity to implement HR analytics in the coming years [2]. The question
remains what, why and how, to implement the HR analytics in an
enterprise at all sizes; small, medium or large, is still open for
discussion.

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80
In implementing any improvement, it is necessary to understand,
what, why and how, of the activity that is being implemented. Any set
of information/protocol, which explains both why, how, and what is
called a framework.

 HR analytics framework looks like an art than a science at this point.

There are multiple frameworks for adopting analytics for HR
functions ranging from stages to 6 stages and beyond. Also, there
are concerns on should the progression of HR analytics adoption be
linear and gradual or contextual. In this post, we will discuss some
of the common frameworks and provide pointers in adopting our
proprietary framework called ‘Employee Life Cycle Analytics (ELCA)
developed by the researchers and practitioners at RACE labs at
REVA University

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Progressive or Perspective
The number of stages of maturity of the HR function to adopt
analytics is given by multiple groups/researches. All of them have
merits and limitations. Some of these frameworks are created by
professional organizations, some by consulting companies and some
from software vendors. First of these frameworks is provided by a 
practitioner [3]. It suggests a two-stage progression from current
practices to best practices in HR analytics. It marks where the
adoption of analytics in HR function hits the wall and further progress
plateaus.

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 The next framework comes from a professional body, which suggests a
three-stage approach to the adoption of HR analytics [4]. This can be thought
of an extension to the previous two-stage framework, but more directional in
adopting analytics in HR. Instead of just having basic/advanced analytics,
this framework suggests, how organizations are categorized based on the
current practices of HR analytics. They can move from an aspirational
company to a transformational enterprise in managing people.

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 This is followed by a four-level maturity model, adopted from the likes of
CMM from Carnegie Melon University [5]. Multiple experts have contributed
to giving their perspectives to this maturity continuum. One of the best known
is from Josh Bersin from Deloitte [6]. It progresses from being an adhoc, to
proactive, to strategic and predictive forms of analytics as to the possible
levels of progression for an HR function.

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 Next in the line is a five-stage maturity model for adopting analytics
in HR, from Oracle [7]. Oracle being the preferred database solution
provider for many organizations, has proposed a technical solution,
for which it has a product at every stage. Our take on this model is
the cost and complexity of implementing a solution like this, is
difficult for most of the organizations.

85
 The number of stages goes on increasing, but the value that can be derived
from each stage becomes difficult to quantify and the overlapping of the
functions across different maturity levels makes it more complex to
impellent. One such framework is given by Fosway group [7]. The frame
becomes complex at one end of the spectrum by making it more automated,
removing the need for HR analyst, with domain knowledge. This looks more
like a technology solution than a business solution.

86
 HR Analysis is the process of examining and gleaning insights from the
data provided by the reports and discovering the relationships between data
sets. HR metrics and reports aren't very useful to a business if they're not
analysed. 
HR Analytics is a term used to describe the product of the evaluative
process which enables Human Resources teams to draw conclusions from
different sets of HR metrics, data and analysis. 
HR analytics is an umbrella' term which covers all aspects of HR data
analysis in a business. Arguably, the most important aspect of HR analytics is
people analytics - a subsection of HR analytics which looks at information
directly related to employees in your workforce.  
What’s the difference
 Much like reporting and analytics, the terms HR analytics and 'People
between HR reporting and
analytics? Analytics' often get conflated and used interchangeably. Though the two
terms overlap, there are many aspects of HR analytics that don't fall under
'people' data.

87
HR Reporting is the final product of a data collection process. Human
resources teams can collate and organise the data, insights and analytics from
reports into easy to understand displays. HR teams then present this
information to management teams for review, which then informs strategies
and business decisions.
Put simply: HR reports provide data. HR analytics provide actionable
insights. HR reporting is the presentation of these insights. 
The potential of HR analytics and reporting lies in the ability to identify
and predict business trends. HR analytics enable management and Human
Resources teams to make strategic and data-driven workforce decisions to
improve workplace issues such as productivity, wellbeing and employee
engagement.  
Let’s look at an example. The HR team at Company A can see from their
data that there’s been a spike in employee satisfaction over the summer.

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HR hold all of the cards when it comes to optimising workforce strategies,
but sitting on a bank of data without putting it to use is where many fall
short. Realising the potential of HR reporting, HR analytics and people
analytics can transform how any business operates and provide cost-effective
solutions to drains on your bottom line profits.

Using HR metrics to inform day-to-day HR operations, reports and HR

analytics provides quantifiable proof to back up business strategies and
important operational decisions.

Managing and collating HR reports can be a daunting task, but using expert
HR software to streamline processes can provide your team with instant
reports and actionable insights.

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 Continue…. & Revision
Next Lecture

90
Thank
you
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