Payroll Liabilities: Types and Principles

Proper management of the payroll system is one of the primary tasks for any company. It helps to manage all the important aspects of their employee like salary payments, tax deductions, allowances, etc. Every business has some of the other liabilities which they need to manage properly. If you are an employer then you have to come across the payroll liabilities properly. It will help to manage the overall accounting of the organization properly. Many organizations now outsource payroll services to an expert agency.

What are payroll liabilities?

Payroll liabilities are the amount of money that you are supposed to pay out in the future before the given date to the employee. So, currently, it becomes easy to overlook the money in payroll.

While making the budget, it is important to take into account the payroll liabilities. This will avoid the employer running out of funds with proper payroll management services. It is important to understand that payroll liabilities are different from payroll expenses.

What are the different types of payroll liabilities?

There are various types of payroll liabilities that need to consider by their employer to maintain a proper payroll management system.

Here are some major types of payroll liabilities:

1. Payroll taxes

While managing the payroll of the employee’s it is important to consider the payroll taxes incurred. There are different types of payroll taxes are state and income taxes, federal income taxes, social security tax, medicare tax, and other taxes applicable. While withholding the payroll tax liabilities, you can hold it and deposit before the given deposit date.

2. Wages of the employee

One of the primary tasks in payroll management is paying your employees properly. Withholding the employee wages will depend on the way the employee takes the wages. If the wages are paid on weekly basis, then the withholding period will be accordingly. The unpaid wages are the liabilities for the employees until the payment is made.

3. Service cost of the payroll

Some cost is also incurred in the service provider cost for the payroll management. This may be either an external agency or software that provides payroll management services. Here, you take the service of the payroll and withhold the amount for some while.

4. Other costs in the payroll

Apart from the above-mentioned costs, there are other costs involved in payroll management. Some of the costs include retirement fund contributions, health insurance contributions, current liabilities and payroll. All these contributions come under the payroll liabilities until they are given to proper parties.

What are different payroll liabilities principles?

1. Accrual Principle

The accrual principles are all the expenses that are done during a fiscal period and after the end of the fiscal period, it is paid. This helps the company to develop cash assets during the fiscal period.

2. Matching Principle

In the matching principle, the revenue generated in the period is recorded in the same period. So, the payroll expense is deducted for the current fiscal years, even when the employee may not receive the bonus or paychecks during the next fiscal year.

It is very tricky to deal with the payroll liabilities, as an expert is needed to get payroll management services properly. When you outsource payroll service, it can help you greatly to achieve better payroll liabilities.

Meru Accounting is a leading payroll liabilities service provider agency where you can outsource payroll services. Meru Accounting is a leading accounting service provider agency around the world.