What Is Accrued Payroll? And How To Calculate It

Key takeaways:

• Accrued payroll refers to the amount of money that a company owes its employees for work they've completed but haven't been paid for yet.
• Tracking accrued payroll is not only required by law but also helps manage labor costs and make better staffing decisions.
• To calculate accrued payroll, you need to determine how much an employee has earned during the pay period and subtract any deductions.

What is accrued payroll?

First things first: accrued payroll is just a fancy way of referencing the money that a company owes its employees for the work they've done but haven't yet been paid for. So, if your employees work for two weeks and get paid every other Friday, then the accrued payroll is the amount you owe them for those two weeks between the last payday and the current one.

Now, you might be thinking, "Why does this matter?" Well, for starters, it's the law. The Fair Labor Standards Act (FLSA) requires employers to pay their employees on time and in full. Accurately tracking accrued payroll helps ensure that you're complying with this law and paying your employees what they're owed.

But beyond that, accrued payroll is an essential tool for managing your business's labor costs. By tracking accrued payroll, you can see how much you're spending on labor each pay period, which can help you make better decisions about staffing and other labor-related expenses.

How can I calculate accrued payroll?

To calculate accrued payroll, you need to figure out how much each employee has earned during the pay period. This includes their regular pay, any overtime, and any bonuses or benefits. Then, you subtract any deductions, like taxes or health insurance premiums, to arrive at the net pay owed.

Now that you know what accrued payroll is, it's time to start tracking it. You can use a spreadsheet or accounting software to keep track of your employees' hours, pay rates, and deductions. You'll also want to make sure that you have a system in place for paying your employees on time, such as direct deposit or paper checks. Alternatively, you can use Panther. Our all-in-one platform makes international payroll faster and easier, we also help ensure that you are in compliance with local labor laws.

One final tip: it's always a good idea to review your accrued payroll on a regular basis, such as at the end of each pay period or each month. This can help you catch any errors or discrepancies and ensure that you're paying your employees what they're owed.

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