Every business eventually owes more than just pay checks. There are salaries, benefits, taxes, and bonuses that have been earned but not yet paid.
Accrued payroll, also known as payroll accrual, captures those liabilities and ensures your financial records and forecasts are accurate, compliant, and transparent.
Accrued payroll refers to all payroll-related expenses that a company owes - such as wages, salaries, bonuses, commissions, PTO pay outs, payroll taxes, and other benefits - that have been incurred but not yet disbursed.
It is recorded as a current liability on the balance sheet, until the payments are made.
Accrued payroll plays a critical role in financial and operational management:
Accurate financial reporting & compliance: reflects when expenses are incurred - not just when they’re paid - aligning with accrual accounting and standards like GAAP or IFRS.
Cash flow and budgeting clarity: helps organisations anticipate pending payroll costs, reducing surprises and enhancing planning.
Liability visibility: by properly tracking accrued payroll, businesses maintain a realistic view of short-term obligations tied to payroll.
Accrued payroll includes a wide range of employee-related obligations:
Salaries and wages (hourly or salaried).
Overtime, bonuses, and commissions.
Paid time off (PTO) – unused vacation or sick leave earned but not paid.
Employer payroll taxes and benefits contributions (e.g. Social Security, pensions, healthcare).
Here’s a simplified process:
Identify the pay period and determine the end date for accrual.
Calculate unpaid compensation:
For hourly workers, multiply hours worked by pay rate.
For salaried employees, prorate salary based on days or pay period.
Add compensation components: bonuses, commissions, overtime, PTO.
Include employer-side payroll taxes.
Create journal entries: debit expense accounts (e.g. wages expense) and credit accrued liabilities (e.g. accrued payroll).
Example: if your pay period ends on June 30 but payday is July 5, any wages earned through June 30 must be accrued as a liability on June’s financial statements, even though payment occurs later.
At Mauve Group, we go beyond global payroll: we safeguard your financial integrity through smart accrual practices:
Comprehensive payroll accounting support across regions.
Precision in accrual calculation, no matter the compensation complexity.
Integrated reporting across employer responsibilities: wages, benefits, taxes, PTO.
Forecast-ready visibility into payroll obligations for better budgeting.
With Mauve handling accrued payroll, you gain accuracy, clarity, and operational peace of mind – leaving you free to focus on growing your global workforce.
Global payroll services: outsourced solutions for managing international employee compensation.
Payroll liabilities: the total wages, benefits, and taxes owed to employees.
Payroll outsourcing companies: external providers managing payroll compliance and administration.
Employer of Record (EOR): a service provider that legally employs staff on behalf of companies expanding internationally.
Salary benchmarking: comparing pay scales across industries and regions to ensure fair compensation.
Independent contractor payments: compensation for freelancers or consultants, often distinct from accrued payroll.