The total cost to you of an employee’s pay is made up of four parts:
- Employer’s NIC
- Employee’s NIC
- PAYE tax
- the net wages paid to the employee
On the P&L you want to show gross wages (which includes 2, 3 and 4) and employer’s NI (number 1), but the payments you make from the bank are net wages (4) to the employee and the sum of 1, 2 and 3 to HMRC.
The payroll journals are how you re-apportion the money to achieve this - you debit “gross wages” for 2+3+4 and “employer’s NI” for 1, and credit “NET staff salaries paid” with 4 and “PAYE” with 1+2+3. The net salaries and PAYE nominal codes should end up at zero as this journal balances the debits created when you tagged the salary payment and HMRC payment from the bank account.