Wages and salaries are often one of the largest items of expenditure for a business. Personnel department is the part of a business that deals with wages and salaries.
Wages and salaries are calculated as gross pay less various deductions statutory deductions such as income tax and non-statutory deductions such as donations to charity or contributions to savings schemes. Payments may be made by BACS, cash, cheque and so on.
Gross pay is calculated in a variety of ways based on hours worked, sometimes including overtime, on the amount of work completed or as a proportion of an annual salary. Bonuses and commissions are sometimes paid as incentives.
As the elements of wages and salaries may be quite detailed, it is important that they are correctly documented and authorised. Records as well as the actual pay need to be kept secure and carefully controlled.
Payroll is calculated and payment made by cash or some form of bank payment. Wages and salaries are, therefore, ultimately paid from the bank account and recorded in the general ledger.