Both the payment of salaries and the contributions that the company must pay as part of payroll payments are in "Group 6: purchases and expenses," of the General Accounting Plan. The expense accounts used to calculate these items and to be able to post the salaries are as follows:
- "Account 640. Salaries": it shows the gross salary that the worker receives. This account, therefore, includes any fixed and occasional remunerations that the company pays to workers, in addition to accrued remunerations.
- "Account 642. Social Security paid by the company." This account includes the payments that the company makes to Social Security for the work that its employees perform for the company. This account is not shown in the pay stub that is provided to the employee.
When doing the standard posting of a payroll entry, first, Account 640 is considered, that is, the gross salary that corresponds to the worker and the expense that entails for the company. However, the gross salary is not the total amount the employee receives in their paycheck, since certain amounts are deducted in account 640, such as Social Security contributions and income tax withholdings, which the company pays on behalf of the worker by withholding these items from the paycheck.
These amounts that the company pays on behalf of the worker are listed in "Group 4: Creditors and debtors for commercial transactions" of the GAP. The mandatory contributions that the worker has to pay to Social Security are shown in "Account 476. Social Security organizations, creditors," while Personal Income Tax withholdings are shown in "Account 4751. Revenue Service, withholdings payable."
The difference between Account 640 and the sum of Accounts 476 and 4751 is what the company must pay the worker. This amount is shown in "Account 465. Outstanding remunerations." When posting the payroll, it is important to realize that it is obligatory to make a 465 account for each worker, since the salary received by each worker is different and must be reflected accurately in the company's accounting plan. Accordingly, the accounts will be listed following the pattern 465.1, 465.2, 465.3, etc., until the total accounts equal the total number of workers in the company.