What is Payroll Accounting?
Payroll accounting is the process of recording all expenses and liabilities related to employee compensation, including basic salary, allowances, GOSI contributions, taxes (where applicable), and end-of-service benefits. It produces the entries that flow into the income statement and balance sheet each month.
How It Works
- Calculate gross salary and statutory deductions (GOSI for Saudis, other deductions where applicable).
- Debit salary expense and credit cash or bank for the net pay, with separate credits for GOSI payable and any other liability accounts.
- Accrue end-of-service benefits each month using actuarial estimates.
- Post payments through the Wage Protection System (WPS) channel and reconcile to GOSI portals.
Saudi Context
Saudi employers must process payroll through the Ministry of Human Resources and Social Development’s Wage Protection System (WPS), paid via a licensed bank, and remit GOSI within the first fifteen days of the following month. The Ministry of Human Resources monitors WPS compliance, and non-compliant employers face penalties affecting their Nitaqat ranking and Ajeer permits.
Example
GOSI rates step on a known schedule, so work from the dated table rather than a single number. Under the existing system the split is 9% pensions per side, 0.75% SANED per side and 2% occupational hazards on the employer, giving 9.75% employee / 11.75% employer — 21.5% combined. Subscribers who joined under Royal Decree M/273 are on a separate scale whose pensions rate rises 0.5% per side each 1 July: 9% from 3 July 2024, 9.5% from 1 July 2025, 10% from 1 July 2026 (in force now), 10.5% from 1 July 2027 and 11% from 1 July 2028 — so today that cohort is 10.75% employee / 12.75% employer, 23.5% combined.
So a company with SAR 30,000 of Saudi contributory wage on the existing system owes 30,000 × 21.5% = SAR 6,450, or 30,000 × 23.5% = SAR 7,050 for the new-entrant cohort. On SAR 20,000 paid to non-Saudis only the occupational-hazards branch applies at 2%, employer-side: SAR 400. Note how that follows from the drafting — the pensions and SANED articles are written to apply to السعوديين, while the occupational-hazards article carries no nationality qualifier at all. Rates apply to the Article 17 contributory wage (basic wage and what is treated as such, cash housing, in-kind housing), not to gross pay. Contributions are due within the first fifteen days of the following month.