It seems odd that the P&L report shows Gross wages and then Net/NI/Pensions amounts all of which are added together in the Expenses section since Gross would normally include Net/NI and Pensions?
Hello @willtfrank
When posting wages the debits and credits are posted to different codes.
Depending on how you process payroll there is also an option to Post Net Wages to Balance Sheet Only
More information about posting payroll journals can be found in the link below
“Gross wages” includes the employee NI and pension contributions (which you deduct from their wages before paying them the net), but the employer contributions are in addition to the gross wages and it’s these that are in 7006 and 7007.
7003 is not used when you’re doing proper payroll journals (with “post net wages to balance sheet only” turned on).
Hi Steve,
Thanks for this. I may well be missing something but the reference doesn’t seem to explain the issue that the P&L shows both net and gross payroll entries as expenses; surely only gross or the sum of the Net/NI/Pension is required? I’m testing out the BrightPay/QF link which offers the option of sending entries for each individual or the sum, thereof. I use the the former since that gives me the ability to tag each persons’ actual payment with an uploaded bank statement.
Hello @willtfrank
the P&L shows both net and gross payroll entries as expenses; surely only gross or the sum of the Net/NI/Pension is required?
@ian_roberts explains this well above
I suspect there’s two things getting mixed up here. QuickFile has two different modes of operation when you tag a bank transaction as a “salary payment”. By default (with the “post net wages to balance sheet only” setting turned off) it uses a simplified mechanism that works for things like small company directors who are paying themselves salary below the NI threshold and therefore don’t have any NI, income tax or other deductions to make. In this mode when you tag a salary payment QuickFile creates a journal that does
- Cr bank
- Dr “net wages” (balance sheet code 2xxx)
- Cr “net wages”
- Dr “net staff salaries paid” (a P&L code 7003)
This results in the wages that have been paid out showing as an expense on the P&L without you having to actively journal them.
If you do have deductions to make then you should switch “post net wages to balance sheet only” on. In this mode, when you tag a salary payment it simply posts the contra entry to the “net wages” code on the balance sheet without affecting the P&L. It’s then up to you to create your own journal like the one in @QFSteve’s screenshot to put the gross wage cost, employer’s NI and pension (all debit) onto your P&L, the net wages due as a credit onto the “net wages” balance sheet code (to net off against the debits when you tag the bank transactions), and anything you owe to HMRC onto the “PAYE” balance sheet code - income tax deductions, employee NI deductions, and employer NI contributions - and similarly anything you owe to the pension provider onto its own balance sheet code - employee deductions plus employer contributions.
If you are seeing a non-zero balance on both 7000 and 7003 then that means you’ve done a mixture of the two approaches, probably you’ve created a proper journal at some point but you’ve not known to enable the “post net wages…” setting so you’ve ended up with your net wages debit on P&L rather than it cancelling out the credit on the balance sheet code. If this is the case then the fix going forward is to correct that setting, and then edit any previous journals created by salary payment tagging to remove the second pair of lines that moved the net from BS to P&L.
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Ian,
Brilliant - thanks very much for such an extensive and instructive response.
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