Apologies if this sounds a bit stupid but Im a bit stuck on my Sage instant Accounts, basically i work for a recruitment aganecy who provide temporary staff who are paid weekly through PAYE. Their gross wages are the direct costs of our sales but my sticky point comes when i come to enter them on sage, ideally i would like to enter their gross wage amount split between net wage, NI and paye Tax so i can show our true profit margins, but to match it up to the bank statement i have put in just the net wages which is obviously exaggerating the profit margins as its not including the tax and NI (or employer NI). With the wages being our direct costs and not as usual office wages im confused about how to get round this, at the moment we have our sales as n/c 4000 and the net wages for these going through n/c 6000, does anyone know how i can post the NI and PAYE tax as direct costs without affecting my bank rec?
Even as a recruitment agency, wages should still be posted 'the usual' way:
For the wages wages calculation:
Debit the gross pay to the relevant P&L code, credit the wages control code. Debit the employer's NI to the relevant P&L code, credit the PAYE/NI control code. Debit the employee's NI to the wages control code, credit the PAYE/NI control code. Debit the PAYE to the wages control code, credit the PAYE/NI control code.
For the payments:
Debit the wages payments to the wages control code, credit the bank.
Debit the HMRC payments to the PAYE/NI control code, credit the bank.
Doing it this way will ensure the accounts are "controlled", and the correct costs are shown on the P&L.
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Vince M Hudd - Soft Rock Software
(I only came here looking for fellow apiarists...)
Ok now im really confused...i take it this is a Journal entry your talking about? Im quite new to sage so still getiing used to how it works, when you are talking about the control codes what do you mean? If i do it the way you mentioned will all the aspects of the gross wage show under direct costs or will they move in to overheads?
It sounds as if you should have a pair of nominal codes for Wages & Employer NI in both the 6000s (cost of sale) for your temps and the 7000s for staff.
I'm not sure why you would want to post PAYE (or Employee NI) as a direct cost - they are not costs to the business - the business is only collecting them from the employee to pass on to HMRC.
Where Vince was quoting 'PAYE/NI control code', he is meaning sage nominals 2210/2211 which hold the balances owing to HMRC.
You are wrong in saying that PAYE and employee NI are not costs to the business. They are costs to the business and are part of the gross wage. Yes they are collecting them on behalf of the business but they are still costs of the business.
To add help to the orginal query it would be eaiser to add figures
Say when you run the payroll the figures work out as
Gross Wage £500
PAYE £100
EE NIC £50
Net WAGE £350
ER NIC £70
(these figures are just for illustration purposes.)
Say you run the payroll at the end of May 2012 based on the above the journal to recognise would be
DrGross Wages N/C 5XXX (direct cost) £500
Cr Wages Control N/C 2220 £350
Cr PAYE N/C 2210 £100
Cr NI N/C 2211 £120
Dr ER NIC N/C 5XXX (direct costs) £70
At the end of the month you will pay the net wage to the person
Dr Wages Control N/C 2220 £350
Cr Bank £350
Then in June sometime you will pay HMRC their debt
Dr PAYE N/C 2210 £100
Dr NIC N/C 2211 £120
Cr Bank £220
The net effect is that the business has a cost of £570 (Gross £500 and ER NIC £70 in the profit and loss account) and has paid the same monies out being £350 to the employee and £220 to HMRC to cover the employees PAYE and NIC.
Thanks for the advice i think i can make some sense from it now. So if i set up a pair of nominal codes under direct costs one for Gross wages (as opposed to my net wages) and one for employer NI and run through the journal entry below for each employee it should show correctly in the P&L?
Mark thanks for the example thats really helpful, we invoice and pay our wages out weekly, will this work on a weekly basis as well?
Im going to have to go back through the whole of May to correct this, is there an easier way than deleting all individual net wage transactions and redoing them? What i mean is, is there a way of entering the ee NI, tax and er NI for May that i have missed off without having to start from scratch?
In the example above what you have probably entered is
Dr Net Wages N/C 5xxx £350
Cr ???? £350
So it is easy enough to do a journal to sort to get the correct gross figure. If you want you could just set up separate profit and loss nominal codes for PAYE, EE NIC under the profit and loss account and then change the charge of account to add them together and call gross wages for reporting purposes.
Yes can use the above example i gave above for weekly processing. All it means is the liability wil sit a bit longer but it will be cleared the following month.
The example above is how you should process wages but many people have their own way of processing which works for them and gets the right result.
At the end of the day you just need to know what you want to achieve and know where you are at present to work out the adjustment to get you there.
Thanks for all the advice, things seem a lot clearer now. I think im going to go for setting up the seperate nominal codes approach as that will suit our company the best.
Great reply MarkS - helped me out a lot!! Quick question - do you ever use the following codes and if so how would you move payments in and out? Ive taken over at one company and they just put the net wage through 7002/7003 and do not use the net/gross accounts so now Im confused!
7001
Directors Salaries
7002
Directors Remuneration
7003
Staff Salaries
7004
Wages - Regular
7005
Wages - Casual
-- Edited by Cheshire on Saturday 25th of May 2013 04:17:33 PM
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Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
I use 7000 for Gross wages, but split the Director's salary to 7001. I also have 7006 for Employer's NI cost. It's not really right to put the net wage to overheads as you do not get the true cost of the wages expense. Net wages are a liability to the company so will need to appear on the Balance Sheet of the Company and not in the P & L.
