Hello guys! I have a dilemma that I wish to share with you
to get your perspective; am also afraid it may look foolish so please excuse my
ignorance - am quite new to accounting.
My company employs 15 people directly. However, from time to
time, depending on jobs availability, we are forced to contract casuals who
are often different for each occasion. My dilemma arises when paying them for
work done.
Unlike with employees where you can create payroll, with
casuals, it would be impossible because they could sometimes amount to 20 or
so, and it becomes untenable, even unthinkable, that I should clutter my
employees tab by including them, especially when they probably wont be contracted
for the next job.
Of course, I could decide to pay each of them separately
from a cash account. The problem, however, is the unavailability of a matching
expense item (in this case Wages & salaries) from the Account drop down tab
during payment from a cash account. The Wages & salaries account can only
be activated through payroll where the liability is shifted to Employee
Clearing account to be cleared from a cash account.
My question, therefore, is whether or not I will be correct
to create a new expense Item for use when paying casuals directly from a cash
account, which means they will not feature as part of my company’s employee
account as set up in Manager. Your input is highly appreciated.
I think that your suggestion of creating a new expense account like Casual Salary and Wages would actually be quite a good idea as this would separate your Main Salaried Staff operating costs that you have to pay regardless of clients from your casual staff who you presumably only hire when business is hopping as it were. This is what I would do. As you say, there is no benefit to using payroll for this unless you need to record paye, nic or any other employees taxes.
If these people are not employees under local employment and tax laws, then set them up as Suppliers. As @dalacor suggests, allocate their payments to a new expense account. Your local tax forms may have a category that will suggest a title, such as Contract labor. You may have to file special tax reporting forms at the end of the year or possibly more frequently.
On the other hand, if under local law they are employees, no matter how short their duration, you may have no choice but to set them up as employees.
This is really a matter for a competent, local accountant. The small amount it will cost you will be more than repaid if it keeps you out of legal trouble with tax authorities. Remember, Manager is not an accountant, only an accounting tool that presumes you know what needs to be done.
I agree with the both of you, and this is what I initially thought. I understand what you say @Tut; it really is a matter to be handled by a competent accountant. On the flip side, however, am really hoping to build some valuable insights into this practice while at it. I suppose for now, I’ll just categorize them as suppliers before I can arrange for professional accounting services. Thanks for your responses.
I would not categorise them as suppliers as they are not selling you goods nor are they companies that you subcontract work to. As you probably won’t use them again, there is no value in having them listed as a supplier. I would create an expense account and just pay them through that and be done with it. The only issue arising would be employment tax which is outside the scope of this forum as the tax laws vary from country to country and from business to business.
For casuals, local tax regulations in my country give me some leeway and so I suppose I can just pay them for the work done and that’s it! As you say, I may not be needing them anymore, or will only require their services at an unknown latter date. Thanks for sharing @dalacor.
Perhaps not, but they are selling you services. And some tax jurisdictions require compensation even from casual labor to be reported as though the recipient were a sole proprietor of a business. Otherwise, necessary taxes may not be paid, such as various retirement or health program levies.