Payroll Accrual

Accrued payroll, also known as payroll accrual, is the accumulated amount of salaries, wages, and other compensation that an employer owes employees for work performed during a given pay period but has yet to pay out. It is one way an employer can track expenses over time to help plan, better understand its liabilities, and forecast financial planning for the future.

If an employee works 180 days but is paid over 12 months, the amount of money earned but not paid will be accrued. This practical approach ensures that during the months when the employee is not working but is still being paid, the salary will come from the accrued amount, providing a reliable system for managing employee payments.

Payroll accrual refers to an employer’s payroll liabilities, indicating how much is owed in payroll.

Set up Payroll Accrual

To set up Payroll Accrual, do the following:

1. Enter the Accrual Account on the Human Resources Profile - State page.

2. Select Accrue on the General tab of the Job Class page for job classes that are subject to accrual. If Accrue is not selected, the salary will continue to be expensed as it is paid.

3. When setting up a pay run, if accruals are to be calculated, each pay group must be entered on the Pay Run Setup - Step 2 page. You cannot use * - All Pay Groups. You must enter the default earning days for each pay group in the Default Days column.

4. If an employee begins working in the middle of a pay cycle, the employee's number of earning days differs from the pay group's default. You must enter the number of accrual days in the Accrual Days field on the Payroll Information - State Required page. The default is 0.00. After the paychecks for the current pay cycle are printed, the Accrual Days field is reset to 0.00.

5. When paying out a contract, use the Payouts option on the Actions menu of the Employee Information page. On the Contract Payout page, the Days Worked column value is the number of days the employee has worked since the beginning of the contract, including any in the current pay cycle. Select Change Accrual Days on the Contract Payout page to display the Employee Accrual Exception Days page. The Accrual Days field value is the number of days the employee worked in the current pay cycle. If the contract is paid after the end of all working days, the field value is 0.00. The Accrual Days field on the Payroll Information - State Required page is updated with the Accrual Days field value on the Employee Accrual Exception Days page after paying out a contract.

Important Considerations

• When an employee's salary is to be switched to a new fund mid-year, adjusting the accrual amount in both the old and new funds is crucial. This is done through journal entries. Remember, the salary is only fetched from the current fund accrual account. To do this, there must be a debit to the accrual account in the original fund and a credit to the accrual account in the new fund. Print a Distribution Detail Report for the employee to determine the amount of the journal entries.

• The accrual amount is always distributed based on the distribution and percent currently set on the employee pay rate screen. This provides a flexible approach. An override is possible only by changing the employee pay rate screen. However, if the fund or percent is altered, the accrual amounts for this employee will need to be adjusted as in the previous point.

• Due to rounding in both gross pay calculation and accrual distribution, pennies may be left in the liability accrual accounts. These pennies may be cleared up through journal entries or closing the liability accounts.

• Paid vacation and holidays do not require any additional processing. The gross pay for the pay period remains the same. The number of days to calculate earnings is the default.

• Accrual will be calculated and posted similarly for any pay frequency.

• Leave without pay will be handled using the 09 paycode with negative time. The negative time is converted to days, and this amount adjusts the employee's default accrual days.

• If accrual is to begin in January, adjustments must be made for all “earned but not paid” money. The difference between earned and paid must be calculated. This amount must be expensed to the appropriate accounts and entered into the accrual account of the proper fund. If accrual is to start at the beginning of the new fiscal year, do not select Accrue on the General tab of the Job Class page. Before the first pay of the new fiscal year, select Accrue for job classes that are subject to accrual.