Overview

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Salary and benefits are primarily accrued for bi-weekly employees to assist departments in the projection of monthly salary expense, and to record the expenses per Generally Accepted Accounting Principles (GAAP).

Oftentimes, the payroll period for bi-weekly employees ends just prior to the end of a month. To account for the workdays that a bi-weekly employee works between the end of the bi-weekly pay period (immediately preceding the end of a month) and the end of the month, we accrue those days wages and benefits to the month in which the work was performed.

We will then reverse these amounts in the next period (month) when the actual wages are paid and accounted (recorded) for. As a result, the salary and benefits that were reversed will offset the actual wages recorded in that month. Please note that the actual wages may be different than what was accrued. This is the result of using a calculated amount to estimate the accrual versus what the wages actually were (includes adjustments like overtime, non-compensated time off, etc.).

Essential Information

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• Accrual accounting is a basis of accounting in which expenses are reported in the period incurred, rather than when paid
• Estimates are used in determining salary and benefit accruals for bi-weekly employees

Next Steps

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The salary accrual is calculated by taking the number of working days remaining after the last bi-weekly pay period of a month and dividing it by the number of workdays in a bi-weekly pay period (i.e. 10 workdays). This is then multiplied by the total earnings (including adjustments) that were paid on the last bi-weekly pay period of the month.

For example:

1. There were 5 working days remaining in July 2022 after the bi-weekly pay period of 7/10/22-7/23/22. This number is divided by 10 to get 0.5 (= 5/10).
2. An employee who was paid $2,000 for the bi-weekly pay period of 7/10/22-7/23/22 would have a salary accrual of $1,000 (= 0.5 x 2,000) recorded in the month of July 2022.
3. The $1,000 would be reversed in August 2022 to offset the actual July portion (7/25-7/29) of earnings paid and recorded in August for the 7/24/22-8/6/22 pay period.
4. The goal is that only August earnings (8/1-8/6) are recorded in the month of August (expensed in the period incurred) and July earnings are recorded in the month of July (expensed in the period incurred).

NOTE: The amount accrued can be different than actual earnings paid as reflected in the following extended example:

1. If the employee in the example above worked overtime (OT) on July 26th, this would be included in the actual earnings paid in August for the pay period of 7/24/22-8/6/22.
2. Consequently, actual earnings paid and recorded in August would be greater than the accrued amount (didn’t include OT in calculation of estimate) in July.
3. Conversely, if OT was incurred during the 7/10/22-7/23/22 pay period, but not incurred during 7/25-7/29, then the accrual would be higher (did include OT in calculation of estimate) than what was actually paid and earned for the 7/24–8/6 pay period.

The Composite Benefit Rate (CBR) is the only benefit currently being accrued. Composite benefit rates are developed in order to cover the costs of fringe benefits offered by the university. The CBR benefit accrual is calculated by multiplying the salary accrued (above) by the appropriate CBR rate. CBR rates can be found on Blink.