Payroll Expense

The expense that occurs within a company due to the salaries and wages of staff and labor is called payroll expense. The salaries are granted to the staff in return of their services they provide for the business. Payroll expense may also include all the taxes associated with the salaries of the staff and the other financial facilities provided to the staff by the company such as bonuses, medical facility, social security and many others.

Payroll expense is considered as the outbound cash that is paid by the company in terms of salaries and wages during a given accounting period. This definition of payroll expense is related to the cash bases company however in an accrual basis company the payroll expense is considered to be the salaries and wages of given accounting period that are earned by the staff but not paid to them in that accounting period.

In most of the companies payroll expense is the biggest expense of the company especially in those company that provide service oriented projects to the public. In such scenario the payroll expense depends upon the working hours of the staff. On the other hand the business having fixed asset oriented business has extremely low payroll expense. The example of having extremely low payroll expense is that of an oil refinery.

One thing must kept in mind that payroll and payroll expense are not one and the same thing as payroll is the cumulative sum of all the salaries and wages of all the employees where as payroll expense is about 10 to 15 percent higher than that amount.


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