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 SAMA-approved WPS channels and pay GOSI by the 15th 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
A Saudi company pays SAR 50,000 monthly payroll: SAR 30,000 to Saudis (GOSI 22% applies) and SAR 20,000 to non-Saudis (only 2% GOSI for occupational hazards). Total GOSI liability is SAR 7,000, payable to the GOSI portal by the 15th.