Payroll is envisioned as the simple employer employee agreement related to compensation for services. I often think of this as the simple handshake whereby the employer agrees to pay the employee a set rate per hour of work. This was true a hundred or more years ago, but over time; history and governmental regulations complicated this simple relationship.
Gross wages are the cumulative value for hourly based, salaries, production based compensation and commissions paid to employees. These are the core wages paid to all employees rendering service.
I laugh at the definition of labor costs because in my opinion the so called experts only have it half right. Labor costs are more than just gross wages and benefits. It should include the costs of insurance, employer taxation, human resources management and incentives. All of the costs associated with delivering the human element of service should be included. Let’s explore these costs from the most expensive to the least.
In the world of accounting, we stand on two principles; timely and accurate information for the client. Without either, the client can’t make good decisions. As accountants our job is to record economic transactions and report this information in a financial format. For the client it is imperative that the information is provided in a reasonable period of time after the activity.