Payslip earning items are only limited to expense accounts under the P&L. Is it possible to extend them to other accounts in the balance sheet. The reason is that I am un abe to to link third party salary expenses on behalf of our subcotractor. The subcontractor’s employees are paid by us but the liability burden altimately is on the subcontractor and is to be reduced from amount payable by way of linkng the supply control account to payslip items. I hope I am making sense.
These should not be part of your Payroll and payslips. [Revised] Your business should never pay any contractor’s employees. You pay the contractor based on an agreement and they are responsible for their employees. If there for whatever reasons are trust issues of the employees of the contractor to get paid on time by the contractor then you can make evidence of payment to employees by the contractor an explicit part in the agreement. Therefore you pay the contractor directly, based on invoices for services rendered, without paying their workers.
See my post further below:
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You could also have legal and taxation problems
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This is done as we generate the purchase invoice for the sub-contractor and as such, we generate the needed liabilty. However, I dont agree with this statement.
It does not address my cocern and still charges the expense to the account I do not want it to charge. I still feel it possible for this to happen just as the payslip deductions are open to affect other accounts.
Please consult your authorities. It is generally not legal to have a contractor’s employees on your payroll, as this could create an employer-employee relationship. To manage this properly and maintain legal compliance and avoid unnecessary liabilities you should consider having:
- Contract Agreement: Ensure that the contractor is responsible for hiring and paying their employees, with this clearly stated in the contract.
- Payment Process: Pay the contractor directly, based on invoices for services rendered, without paying their workers, i.e. do not put them on your payroll or expense list at all (yes I will revise my earlier post accordingly)
- Liability Safeguards: Include provisions for withholding payments until the contractor meets obligations, and possibly if available require liability insurance to cover risks.
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This may not be entirely true, we run a sepeprate payroll for these employees and we have no signed employee contracts with them. The only thing happening here is that we are barely managing the payroll on behalf of our sub-contractor and there by reducing their purchase invoice liability with the hope using the payslip items. Legal and Tax matters are dealt with precariously as the sub-conractor is not indiginous. In short the expense is not ours and it should not appear in the P&L. .
Indeed nothing regarding to these contractor’s employees should be in any part of your accounts as explained so not in balance sheet not in profit & loss. Even as you state you run a separate payroll you are still engaging in an employer - employee relationship with the workers of another business. It does not matter even these are foreign or not.
We have ourselves cases where we host others and take full care of payroll etc. because these employees are fully seconded to us and essentially become ours for the duration of the contract. This is probably similar to your case often the case with international employees as not every business may have been assigned a quota or similar, or where the foreign business has no legal presence and thus no way of paying the employees in country as no business bank account.
We in such cases “host” their employees and do payroll, payee, pension contribution, health insurance and any other tax obligations and manage related expenses. Indeed these are recorded as our business expenses because in essence they have become our employees.
In these cases we have it detailed in the contract agreement. In any case be it paying a contractor their invoices excluding employee costs or with employee costs these are part of Expenses in P&L. Similar to any employee be it seconded or not this is part of our business expenses no longer that of the contractor.
So either you or the contractor has these employee costs as expenses. It would be tax dodging if the contractor would pretend still to have these employee expenses and thus artificially reduce net-profit by inflating the expenses. From your explanation you do not want to record these inflated expenses either so in that case you should not enter an employee arrangement with your contractors employees.
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