Accounting: chapter 14

• Salaries


  Money paid to employees by the employer on a monthly basis
• Wages


  Money paid to employees by the employer on a weekly basis
• Large businesses may employ hundreds of people and the salaries and wages paid to their employees usually form a large part of their operating expenses
• Salaries Journal


  Journal used to record salaries information
• Wages Journal


  Journal used to record wages information
• Differences between salaries and wages


  • Salaries are paid monthly, wages are paid weekly
  • Salaries are usually paid by EFT, wages are usually paid in cash
  • Salaries have a fixed predetermined monthly amount, wages are determined by time-work or piece-work rates
  • Salary earners may receive benefits, wage earners receive overtime pay
• Normal time


  An employee's normal working hours stipulated in the contract of employment
• Overtime


  The amount of time an employee works beyond normal working hours
• Time-work rates


  Employees are paid an hourly rate for the number of hours worked
• Piece-work rates


  Employees are paid for each completed item
• Time recorders


  Used by businesses to record the time each wage earner worked
• Time sheet


  Used to calculate the hours each wage earner worked
• Salary scales


  Fixed scales that set out the predetermined future earnings of employees based on qualifications and/or experience
• Notches


  The various salary levels in a salary scale
• Gross salary/wage


  The amount determined using time-work or piece-work rates before deductions
• Net salary/wage


  The amount the employee receives after deductions
• Deductions


  • Pension fund
  • Medical aid
  • Unemployment Insurance Fund (UIF)
  • Union membership fees
  • Income tax (PAYE)
• PAYE (Pay-As-You-Earn)


  Income tax deducted by the employer and paid to SARS
• Unemployment Insurance Fund (UIF)


  Provides employees with insurance against loss of employment
• Pension fund


  Used to save money for the retirement years
• Medical aid


  Provides the employee with medical insurance
• Staff associations/unions


  Organisations that represent employees in labour matters
• Pension fund contributions


  Normally calculated by taking a fixed percentage of the gross salary or wage
• The employer makes an additional contribution towards the employee's pension fund
• The employee has a choice about whether or not to belong to a medical aid
• Amount contributed towards a medical aid fund


  Influenced by the number of dependants (family members) of the employee who are also on the medical aid
• The employer can also make a voluntary contribution over and above the amount deducted from the employee's gross salary or wage
• Staff associations and unions


  Organisations that represent employees in labour disputes with the employer
• Net salary (net wage)


  The amount an employee receives, equal to the gross salary less the deductions
• The employer often makes additional contributions towards the employee's pension fund, medical aid and UIF
• Skills Development Levy (SDL)

  A special levy payable by employers to help fund education and training so that employees' skills can be improved and developed
• The SDL is a compulsory levy for all employers who have an annual payroll of R500 000 or more
• SDL amount


  Determined at 1% of the monthly gross salaries and wages register, payable monthly to SARS
• The SDL forms part of the employer's contributions and is therefore an expense to the business
• Salaries Journal


  1. Used to record the gross salaries, deductions, net salaries and employer's contributions

  2. Drawn up at the end of the month and posted to the General Ledger
• Salaries


  The direct cost to the business of employing staff
• Amounts owed by the business


  • Pension fund
  • UIF
  • Medical aid
  • SARS (PAYE)
  • Employees (net salaries)
• Creditors for Wages


  Account used to record the net amount owing to the wage earners
• The employer's contributions to the pension fund and UIF must also be credited
• When posting from a journal to the General Ledger, the debit and credit entries should always equal each other