Definition: Salaries payable is a liability account that contains the amounts of any salaries owed to employees, which have not yet been paid to them. The balance in the account represents the salaries liability of a business as of the balance sheet date. This account is classified as a current liability, since such payments are typically payable in less than one year. The balance in the account increases with a credit and decreases with a debit.
The amount of salaries payable can be particularly large under any of the following circumstances:
- There is a large gap between the pay-through date of salaries paid and the end of the reporting period; or
- The amount of salaries paid to any individuals in the company (such as the CEO) are quite large; or
- The company is comprised largely of salaried personnel, as is frequently the case in a professional services business, such as a consulting firm.
- An employee may have been terminated, and the amount of that person's severance pay has not yet been paid.
A company may employ a large number of salaried personnel and still not have any salaries payable as of the end of a reporting period, if salaries are typically paid at the end of that reporting period. This is because there are no days at the end of the period for which employees have earned their salaries, but have not yet been paid.
The difference between salaries payable and salaries expense is that the expense encompasses the full amount of salary-based compensation paid during an accounting period, while salaries payable only encompasses any salaries not yet paid as of the end of an accounting period. Thus, the amount of salaries payable is usually much lower than the amount of salaries expense.