Accrued payroll is a current liability comprised of four sections. The first is the amount of payroll earned by staff and not yet processed or paid. The second is the dollar value of personal time off accumulated for each employee aggregated into one number. The third consists of payroll taxes owed to the respective governmental authorities and the final section comprises the accumulated benefits payable such as health insurance, retirement contributions, and amounts owed to third parties as deductions from the gross payroll.
The True Cost of Labor
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.
One of the basic business concepts is range of production. It means maximizing the capacity (range) of the assets in your operation. When the business operation goes beyond the maximum production range, costs associated with the marginal production generally exceed the revenue generated with the marginal increase. To maximize profit in any business, operate within your range of production.
There are two different forms of compensation provided to employees; direct and indirect. Direct forms of compensation have a multitude of types or methods, from salaries to bonuses. Indirect compensation is primarily the various types of benefits and long term incentives. This article is an introduction to the terminology of compensation.
One of the forms of compensation is direct remuneration for services rendered by the employee. The term used for this is wages. It consists of four different groups of payment from the employer to the employee. They are salary, hourly, commission and bonus types of wages.
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.
Form 941 is the employer’s quarterly federal tax return. It reports how much federal income taxes were withheld; Social Security taxes and Medicare taxes that are due and how much was paid in deposits to the Internal Revenue Service. The report is filed every three months for each of the four calendar quarters.
What I learned was that equipment didn’t call in sick, it didn’t back talk me, it never got upset about how much it was paid and it just kept on humming. It was making us money and I didn’t have to deal with personnel issues. Boy, if only all production could be like this. Turn it on and make money.
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.