Staff costs in the statements from payroll records
How payroll records should feed staff costs and employee benefit amounts in a client's statements, from ledger agreement to leave pay and owed deductions.
By Achekam · · 4 min read · For Accountants & audit firms in South Africa, Nigeria, Kenya
Staff costs are often the largest expense in a client's income statement and among the least checked. The trial balance shows a salaries account, the payroll shows a total, and if the two look close the line goes into the statements. The trouble is what "close" hides: a month posted twice, a bonus paid through the wrong account, leave pay never accrued, a director's pay sitting in a loan account.
This article covers where staff costs sit, how to agree them to payroll, the year-end liabilities payroll does not book for you and the disclosures that follow.
Where staff costs sit in the trial balance
In a well-kept ledger, payroll lands in a handful of accounts: gross salaries and wages; employer contributions, such as UIF and SDL in South Africa, pension, NSITF and ITF in Nigeria, or NSSF, the housing levy and NITA in Kenya; and liabilities for deductions owed to the tax authority and funds.
Where a client runs payroll on Achekam, an approved pay run is posted to the business's own ledger as a wages journal, with the amounts owed to the tax authority and funds recorded as liabilities. In South Africa, a firm that runs a client's payroll can post the journal into the client's books only when those books are on Achekam and the firm is appointed to them. The options are set out in posting the wages journal into client books.
Even with an automatic journal, check what else reached the staff cost accounts: manual journals, bonuses or casual wages paid outside payroll, and directors' fees processed by the bookkeeper.
Agreeing the ledger to the payroll reports
The core test is a month-by-month reconciliation between ledger and payroll. Achekam's payroll reports show cost, headcount and staff movements by month and by department, which gives you the payroll side of the comparison.
- Agree gross pay per payroll to the salaries accounts, month by month.
- Agree employer contributions per payroll to the related expense accounts.
- Explain differences: timing, a missed or duplicated month, amounts paid outside payroll.
- Agree the year-end liabilities for deductions to the last payroll and to payments made after year end.
- In South Africa, agree the year's PAYE, UIF and SDL to the monthly EMP201 declarations and the annual reconciliation.
Watch for bonuses and once-off payments. Achekam has no separate bonus, correction or final-settlement pay run; such amounts go in as variable inputs on the regular run, so they sit inside an ordinary month's totals. Ask the client which months carried them.
Accrued leave pay and bonuses at year end
Two employee benefit liabilities are often missed.
Leave pay. Where employees build up paid leave they can carry forward, its cost is recognised as they earn it, not when they take it. Achekam's payroll keeps annual, sick, family responsibility and unpaid leave with monthly accrual, so leave balances at year end are available; the firm still has to value them at the expected cost and post the liability.
Bonuses. A bonus is provided for at year end where there is a present legal or constructive obligation, such as a contractual thirteenth cheque or an established practice of paying year-end bonuses, and the amount can be reliably estimated.
The IFRS Foundation's summary of IAS 19 explains how all types of employee benefits are accounted for, including contributions to defined contribution plans; IFRS for SMEs covers the same ground, more simply, in its employee benefits section. Post the accruals as year-end adjusting entries and keep the calculation with the working papers.
Statutory amounts still owed at year end
At year end the client usually owes the last month's deductions and contributions. These are liabilities to agree, not estimates: the payroll records state them. Agree them to the payments made after year end, and look for older unpaid amounts, which may carry penalties and are a warning sign for going concern.
The collectors differ by country, and that matters when you agree payments. A Nigerian employee's PAYE goes to the State where the employee lived on 1 January of the tax year, or when the employment started, so one client may owe several State authorities. In Kenya, KRA collects PAYE and the Affordable Housing Levy, but SHIF, NSSF and the NITA levy go elsewhere.
The note and the directors' emoluments disclosure
The Studio's notes take their figures from the mapped trial balance, and staff costs are no exception. Map the salary, contribution and leave accounts carefully, because a suggested mapping counts only once a person approves it. The draft built from that mapping includes the notes and the detailed income statement, with every figure calculated in code, and facts the trial balance does not hold are left as "[to be completed]".
The disclosures to think about:
- Employee benefit expense in total, with components where they help.
- Key management personnel compensation in total, within the related-party note.
- Directors' remuneration. Company law may require more than the accounting framework does, sometimes director by director, and the rules differ between South Africa, Nigeria and Kenya and between kinds of company. Check the Act for each client before deciding what to show.
Directors' pay is easy to miss when it is credited to a loan account instead of paid through payroll. Ask how each director was paid during the year.
A staff costs note that agrees to the payroll, the ledger and the declarations tells any reader the rest of the set was prepared with care. Firms that run payroll for clients will find what to hand over in bureau payroll reports for clients.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
