Why is an employee's salary sacrifice creating a payroll liability cheque?

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I have recently taken over a position (6 weeks) and I do not have a lot of experience with Reckon. In addition to this, I haven't had to deal with salary sacrifice in the past. This is my issue. One of the directors has salary sacrifice set up for car finance. The money comes out periodically (every week) out of the bank account and this is already recorded in Reckon as a memorised transaction. I have noticed that a Payroll liability cheque that equals 5 payments was created by Reckon but when I look at past liability cheques there aren't any that are relevant, they'e all ATO or super related. I don't know why this happened or whether this happened as a result of me processing something incorrectly. Nothing was mentioned during hand over and I am unsure how to tackle this. What should I do? Should I go into 'Pay liabilities' and pay the cheque? or do I delete the cheque? Please help.
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Mamas

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Posted 2 months ago

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Cheryl Medley

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I don't have experience with SS for items such as you are talking about but I'm thinking it would need to be a liability as that money will have to be transferred to pay the debt - ? Which would mean that, yes, you would process the cheque as you would for Super, PAYG, etc. Not sure why there is nothing showing up previously though, especially as you have taken over an already set up procedure. Is there no one you can refer this to within the business you are working for? My apologies for not knowing an exact answer!
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Mamas

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No unfortunately there’s isn’t anyone that can assist me. It’s a small business and they are no longer using a bookkeeper! Thanks for assisting.
(Edited)
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Carol Wagner

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Hi There
For accounting purposes, the SS is a liability until you have paid the funds to the recipient/car dealership.  The cheque or bank transfer is then debited to that liability account to zero it out.  

It might be an idea to check to see if any of the previous payments to the recipient have been posted to the liability account and not to any expense accounts as it will be a double up in the expense

Hope that helps!

Carol
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Mamas

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Thanks for your help. This is why I am confused, the money is being paid to the car dealership weekly via the business account and this is already recorded in Reckon as a memorised transaction. As mentioned earlier, this was already set up.
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LyndaC

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Hi

Salary Sacrifice transaction:-

In wage the amount salary sacrificed would go to a Payroll liability account and accumulate until payment.
When the transaction is paid to the finance company the funds would debit the liability account and credit the bank.

You should probably check that the salary transaction is actually being recorded correctly by looking at the Salary Sacrifice item (settings, payroll, pay items)  Then follow the transaction through to payment.  This Payroll Liability account should reduce to nil after the payment is made.



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Mamas

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‘In wage the amount salary sacrificed would go to a Payroll liability account and accumulate until payment‘- do you mean the physical payment i.e. money transferred from the bank account to the finance company? Or you mean ‘paid’ in Reckon?

The salary was already set up, I was simply instructed to change ‘Salary sacrifice’ by the typing in the amount whilst I‘m processing the pays. Similarly, the direct debit (bank account) was already set up as was the ‘memorised transaction’ in Reckon to record the money coming out of the bank account.

‘This Payroll Liability account should reduce to nil after the payment is made’-this is what I am struggling with. How and when will the payroll liability account be paid if it’s already recorded in reckon as a transaction and being physically paid through the bank account? I don’t quite understand how this is going to be ‘paid’ i.e. cleared from Reckon without a double up?
Thank you so much for your patience, time and assistance it’s much appreciated.
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Cheryl Medley

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Delete the recorded transaction and do a new one that evens out the liability - ? Or a journal entry through Reckon to get rid of any old ones.
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Mamas

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Thank you so much for your time Cheryl. My only concern about this is the fact that these were setup by a bookkeeper over a year ago (at least). I'm a little apprehensive about making major changes to items setup up prior as the person I am filling may potentially come back to work after the extended leave period ends. 
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Cheryl Medley

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Yes, I can see it could be a problem. But perhaps you could speak with the firm's accountant? They will confirm what to do. That way they will be aware of changes made when they do their EOY audits/accounting. And the book keeper coming back can then do things this way instead of allowing things to accrue that get paid another way. There is still a doubling up of things happening if left this way. Happy to help!
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Mamas

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Thank you. Unfortunately, the business is no longer using a bookkeeper so contacting the accountant is my last resort. I'll make contact with him and see what he says. Thanks again.
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David Hunt

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I notice that this question has been posted in every single forum - so you should have some ideas to go with now.
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Mamas

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Still trying to find a solution. Fingers crossed!