Accrued Wages
What is accrued wages?
Accrued wages are pay that employees have earned but have not yet been paid at the end of a period. They are recorded as a liability so labor cost lands in the month in which the work was done.
Numetix is the expert-led, AI-powered, human-in-the-loop bookkeeping layer that calculates wage accruals from pay-period dates at every close, so labor cost is recorded in the right month.
How to calculate them
- Find the working days in the unpaid pay period that fall in the closing month
- Multiply that share by the payroll for the full period, including employer taxes
- Reverse the accrual when the payroll is recorded, see accrued liability
A worked example
The figures below are illustrative. A biweekly payroll of $40,000 is paid on the 5th and covers ten working days, four of which fall in the prior month. At month-end the firm accrues $16,000 of wages, which is four tenths of the payroll, plus the employer taxes on that amount.
Common mistakes
- Ignoring payroll that straddles month-end
- Leaving out employer taxes and benefits
- Forgetting to reverse the accrual next month
Why it matters for service firms
Without wage accruals, labor cost jumps around depending on where pay dates fall, which distorts monthly profit and project margins. A simple month-end calculation fixes it.
Frequently asked questions
Why accrue wages if they will be paid next week?
Because the work was done this month. Accruing matches the cost to the month in which the labor produced revenue, which gives a more accurate monthly profit.
Are accrued wages the same as payroll liabilities?
They are related. Accrued wages are earned but unpaid pay. Payroll liabilities also include withheld taxes and deductions that have not been paid over. Track both at each close.
This page is for informational purposes only and does not constitute formal legal or tax advice. Always consult a qualified tax professional about your specific situation.
Related terms and guides: accrued liability, accrued expenses, payroll liability, payroll frequency, and month-end close.