What is Payroll Accrual?
Payroll accrual is the recognition of wages, salaries and related employee benefits earned by employees but not yet paid at the balance sheet date. It is recorded as a liability and an expense in the period in which the related services are rendered, in line with the accrual basis of accounting.
How It Works
- Calculate gross wages earned but unpaid at period end.
- Add accrued bonuses, vacation pay and end-of-service portions earned.
- Recognize the liability and the expense.
- Reverse or release the accrual when cash payment is made.
Saudi Context
Saudi employers accrue not only salary but also GOSI contributions, end-of-service indemnity and any housing or transport allowances owed under labor contracts.
Example
If three days of December salary (SAR 30,000) is owed at year-end but paid in January, the December financials show a SAR 30,000 accrued payroll liability.