What Are Payroll Liabilities? Definition, Types & How to Track

Business owners love Patriot’s award-winning payroll software. To avoid missing your deadlines for paying liabilities, you need to keep track of what you need to know about controller salaries and jobs them. To reflect your obligation, your business will record a $25 Health Insurance Premiums Payable for each employee at every payroll run.

They can include employee wages, withholdings, employer taxes, and the cost of payroll software. Recording payroll liabilities is part of how payroll works in accrual method businesses. Depending on when a company processes payroll and the pay date, it’s usually only a matter of days or weeks before payments are due. Certain employment tax deposits may even be due the next day. For example, if you pay employees once per month, the wages they’ve earned but you haven’t yet paid out are a payroll liability. Taxes, payroll costs, and paid time off are common forms of payroll liabilities (we’ll cover all the different types of payroll liabilities in a moment).

How do employers pay their payroll liabilities?

You can use software to reconcile the payroll liability data and ensure you’re processing payroll correctly. Since payroll information is all stored in one place, there’s also a single source of truth to refer to if there are questions or issues that come up. Payroll software can also provide full-service tax filing, from local to state and federal obligations too. The employer’s portion of insurance premiums, and retirement matching if you offer it, is a payroll expense and a liability as well.

We simplify payroll by automatically filing payroll taxes and managing workers’ comp costs. To keep your business running, how to calculate your accounts payable ap cost per invoice you need to have enough money to pay employee wages and cover employment costs, such as payroll taxes. That’s why business accounting includes the liabilities category. It’s a valuable tool that shows you your upcoming expenses.

Understanding how these work and days inventory on hand ratio keeping track of them will help you manage your business more efficiently. The dedicated software programs that manage payroll automatically keep track of all the relevant information in one place. It makes processing payroll easier and eliminates mistakes that were common when using manual tracking methods. Payroll liabilities are costs that employers pay for hiring workers. Payroll expenses are the costs incurred due to day-to-day running a business. You’ll record the $150 and $76.50 as payroll liabilities, along with your company’s matching contribution of $76.50 for FICA taxes.

1. Under the accrual method, you record financial transactions as they happen.
2. You may have employees who earn overtime at a rate of time-and-a-half or even double time.
3. As with any type of liability, you must pay your payroll liabilities to the appropriate recipients.
4. The frequency of filing these forms varies depending on your location and the size of your payroll.
5. It’s also about managing the (often overlooked) financial obligations that come with having a team.

Using an existing payroll service

You might also consider opening a separate payroll account to avoid mixing your payroll and regular funds. And you know what that means—these contributions and other withholdings are liabilities until you send them over to the proper parties. Learn more about each type of liability relating to payroll below. The Ascent, a Motley Fool service, does not cover all offers on the market.

Payroll Service Costs

Because these liabilities represent money you must pay out at a future date, they can be easy to overlook. But if you don’t take these liabilities into account when creating your budget, you could run out of funds. Use payroll software to generate a payroll-liability balance report each time you process payroll.

In contrast, payroll expenses refer to the payroll-related costs you’ve already paid. To put it another way, your liabilities are the payroll costs you still owe; after you’ve paid them, they become expenses. Another way to track your liabilities is to use payroll accounting. Payroll accounting gives you a clear record of your liabilities, including wages and taxes. It also shows you whether you’ve paid your liabilities or not.