Payroll and the associated journal entries Level 2 study tips

what is a payroll expense

Now we have established how the payroll data is broken down in terms of ‘Who gets paid what? Expenses are quite tricky to manage, so it’s important to keep track of each cost. That way, you can pay tax and National Insurance on the likes of company cars, health insurance, and travel requirements. The cost of living crisis may encourage some employers to think creatively about how to support their staff. There are many ways you can provide this – not all support has to cost money.

However, they produce a benefits and expenses guide to help employers. You can also find an A to Z list of typical benefits and the treatment on GOV.UK. ⚠️ You should be very careful about travel expenses incurred in commuting to and from work and any other private travel as generally these are not ‘allowable’ for tax relief purposes.

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7) If any required information has not been entered for the benefit, BrightPay will prompt you of this. Contact us via email, phone or online enquiry form to discuss and arrange your free initial consultation with us. The term ‘temporary workplace’ means that the employee attends the place for a limited duration or temporary purpose. However, some travel between a temporary workplace and home may not qualify for relief if the trip made is ‘substantially similar’ to the trip made to or from the permanent workplace. ‘Substantially similar’ is interpreted by HMRC as a trip using the same roads or the same train or bus for most of the journey.

How do you record payroll expenses?

  1. Collect your upcoming payroll data.
  2. Record gross wages as an expense (debit column).
  3. Record money owed in taxes, net pay and any other payroll deductions as liabilities (credit column).
  4. Check the initial entry to make sure the credit column equals the debit column.

The quality of their physical health and psychological wellbeing is key to a happy, high performing workforce. Since the introduction of compulsory automatic enrolment for workers in 2012, HR departments have been getting to grips with a new set of rules on … It will allow you to be more organised and maintain good relationships with your employees. We give you a quick overview of the treatment of some common benefits here. Previously, there was no monetary limit below which a benefit was inevitably to be regarded as trivial – it was a question of common sense and judgement as to the type and the amount of benefits that was trivial. You can find an A to Z list of typical benefits and their treatment on GOV.UK.

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However, journeys between an employee’s home and a place of work which he or she regularly attends are not business journeys. These journeys are ‘ordinary commuting’ and the place of work is often referred to as a permanent workplace. This is probably the one journal entry which students ‘slip up’ on consistently. In terms of Debit and Credit, think about that key word ‘Expense’, any expense is a debit entry in the general ledger and therefore the wages expense must be a debit entry in the journal.

what is a payroll expense

Neither paying cash reimbursements nor meeting the cost of the expenses directly are problematic as they both fall under the rules mentioned above and can be exempted or assessed to tax accordingly. However, care should be taken when the expense being reimbursed or paid directly is something which is in the employee’s own name – such as a telephone bill or credit card bill. The trickier aspects of expenses and benefits in kind can catch out employers, but the key is to keep it simple.

Payroll and the associated journal entries – Level 2 study tips

Gross wages should be based on a standard working week (for example, 40 hours) and if overtime has been worked this should be picked up from the clock card. However, in some systems, authorised lists of overtime worked during the week are entered so that the revised gross wage can be calculated. (i) Setting up master file data
Robust recruitment procedures are required before new employees are entered on the wages master file. Interviews should be undertaken involving senior staff to ensure the new employee has the required skills.

what is a payroll expense