A payroll audit is a vital review of how your business processes salaries, taxes, and statutory deductions. For Pakistani employers, getting this right protects both employees and your company from regulatory penalties and reputational harm.

Check Your Salary Register and Attendance Records

Start by comparing your official salary register against attendance records and timesheets. Verify that:

  • All employees are recorded with correct national identity numbers and dates of birth
  • Salary amounts match what was actually paid (bank transfers or cash vouchers)
  • Gross and net figures are calculated consistently
  • Any leave, overtime, or deductions are documented

Discrepancies here often signal gaps downstream.

Verify FBR Tax Withholding

The Federal Board of Revenue requires employers to withhold income tax from eligible employees. During your audit:

  • Confirm tax rates applied match the current tax year brackets
  • Check that withholding certificates (Forms) are issued on time
  • Ensure tax deposits to FBR are recorded and reconciled
  • Identify any exemptions claimed and verify supporting documentation
  • Cross-check employee tax slips against payroll records

Errors here invite audit notices and penalties.

EOBI and Social Security Contributions

Employees earning above the EOBI threshold must have contributions deducted and remitted. Audit this by:

  • Confirming the correct contribution percentage is applied to eligible staff
  • Verifying employer and employee shares are both calculated
  • Checking that monthly remittances to EOBI occur on schedule
  • Reviewing EOBI registration status and contribution history
  • Reconciling bank statements against EOBI payment records

Missing or late EOBI payments create employee grievances and regulatory exposure.

Review Statutory Deductions and Benefits

Beyond income tax and EOBI, audit:

  • Health insurance premiums (if offered)
  • Zakat deductions (where applicable)
  • Loan repayments or salary advances
  • Any professional dues or subscriptions
  • Benefits in kind (housing, transport, meals) and their tax treatment

Each must be properly authorized and consistently recorded.

Reconcile Bank Statements and Payment Records

Pull three months of bank statements and match them line-by-line against your payroll register:

  • Verify total monthly salary outflows match recorded amounts
  • Check that tax and EOBI payments are transferred separately and on time
  • Flag any duplicate payments, reversals, or unexplained adjustments
  • Confirm payment dates comply with employment contracts

Bank reconciliation often reveals data-entry errors or missing documentation.

Document Retention and Compliance

Audit your filing practices:

  • Salary registers and attendance records are kept for at least five years
  • FBR withholding certificates are archived and accessible
  • EOBI acknowledgement receipts are retained
  • Employment contracts and amendments are stored securely
  • Any amendments to salary or deductions are formally documented

Make a Plan and Document Findings

After your audit, list any gaps or errors found, assign responsibility for fixing them, and set deadlines. Document the entire process—this creates accountability and protects you if an FBR or EOBI inspector calls.

For businesses using payroll software like PayTime, many of these steps are automated: tax calculations update automatically, EOBI contributions are tracked, and reports are generated consistently. That removes manual error and speeds up audits. But even with software, reviewing the underlying data against bank statements and tax records remains essential.

The bottom line: A payroll audit is not a one-time task. Run this checklist quarterly or semi-annually, or after any significant change in staff numbers or salary structure. Catching small issues early prevents costly penalties and keeps your team paid fairly and on time.