Payroll

[Herman]

It looks OK to me and it should be fine for most places.  In Canada though, 
there are also employer's payrol taxes.  These employer's taxes are equal to, 
or more than the employee's part.  

The purpose of this is to make the employees think that they pay significantly 
less tax than they actually do and then vote for the encumbents again at the 
next election.  Maybe this kind of complication (or worse) also exists in 
other places?

See my howto at http://www.AerospaceSoftware.com for an explanation of the 
Canadian payrol problem.


On Tuesday 22 July 2003 8:29 pm, Jon Lapham wrote:
> I have a preliminary layout for the chart of accounts for the payroll
> section in the documentation.
>
> I am hoping to get opinions about the *general* layout.  Yes, some
> subaccounts could be moved up or down a level, but I am more interested
> (at this point) in people's opinions about the general layout and
> methodology.
>
> The philosophy of this account structure is that you build "payroll
> liabilities" from "payroll expenses".  Then, you pay off these payroll
> liabilities from your checking account (or whatever).
>
> Thus, you checking transactions always involve liabilities, not
> expenses.  Make sense?
>
> So, let's assume you have 2 employees (Emp1, Emp2), and you have to pay
> 2 kinds of employee contributed taxes (Tax1, Tax2).  No employer
> contributed taxes for now, although it would work fine with this account
> structure.
>
> Simple Payroll Account Structure:
>
> -Assets
>     -Checking
> -Liabilities
>     -Employees
>        -Emp1
>        -Emp2
>     -Tax1
>     -Tax2
> -Expenses
>     -Salaries
>     -Tax1
>     -Tax2
>
> Now, how do you go about actually doing payroll?
>
> ============================
>
> Step 1: Build "payroll liabilities"
>
> Every pay period, you start by building payroll liabilities, using the
> expense accounts.  So, let's assume both employees earn 100 units, and
> the tax rate for employee contribution tax1 and tax2 is 10% and 5%
> respectively.
>
> Enter the "total employee cost" (in this case, also gross salary) into
> each of the Liabilities:Employees accounts in a single split
> transaction, split amongst the proper expense accounts.
>
> You accounts will look like this:
>
> -Assets
>     -Checking
> -Liabilities
>     -Employees
>        -Emp1    100
>        -Emp2    100
>     -Tax1
>     -Tax2
> -Expenses
>     -Salaries   170 (2x85)
>     -Tax1       20  (2x10)
>     -Tax2       10  (2x5)
>
> ============================
> Step 2: Transfer Taxes to Proper Liabilities Accounts
>
> Now, we are finished with expenses.  But, we need to shift some money
> around the liability accounts because the employees do not actually
> receive all that money, some of it is tax liability.
>
> In a single split transaction, transfer from Emp1 10 to Liabilities:Tax1
> and 5 to Liabilities:Tax2.  Do the same with Emp2.
>
> You accounts will look like this:
>
> -Assets
>     --Checking
> -Liabilities
>     -Employees
>        -Emp1    85
>        -Emp2    85
>     -Tax1       20 (2x10)
>     -Tax2       10 (2x5)
> -Expenses
>     -Salaries   170
>     -Tax1       20
>     -Tax2       10
>
> ============================
> Step 3: Pay employee salaries, and taxes
>
> Now, write a check to each employee, paying their net salary (85 each)
> and write 2 other checks, to the Tax1 and Tax2 agencies.  In all cases,
> the 2 account transactions go from the checking account to the proper
> liability account.
>
> You accounts will look like this:
>
> -Assets
>     --Checking  (-200 of whatever was there)
> -Liabilities
>     -Employees
>        -Emp1    0
>        -Emp2    0
>     -Tax1       0
>     -Tax2       0
> -Expenses
>     -Salaries   170
>     -Tax1       20
>     -Tax2       10