Wages are payments made to employees for work performed, typically calculated on an hourly or weekly basis. They are a major operating expense for most businesses.
Wages represent compensation paid to employees for their labour. They are typically the largest single expense category for service-based businesses and a significant cost for all employers. Wages can be calculated hourly (common for casual and part-time workers), weekly or fortnightly (common for full-time employees) or as an annual salary paid in regular instalments. Beyond the base wage, total labour costs include employer contributions like superannuation (Australia), national insurance (UK), Social Security and Medicare (US), payroll tax and workers compensation insurance. Leave entitlements (annual leave, sick leave, long service leave) also represent a cost that should be accrued. From a bookkeeping perspective, payroll involves multiple accounts: gross wages expense, PAYG/PAYE withholding liability, super/pension liability, net pay (bank payment) and various leave accrual accounts. SortBooks ensures all payroll-related transactions are correctly categorised across these accounts in Xero, maintaining alignment between payroll records, bank payments and tax reporting.
SortBooks helps with the bookkeeping behind wages by connecting to your Xero account and using AI to suggest the right account for transactions sitting in catch-all accounts, learning from your own past coding. Instead of fixing wages by hand, you review each suggestion, approve it, and SortBooks updates Xero, GST code included. Then ask the AI CFO about your numbers, using live Xero data.
Payroll is the process of calculating and distributing wages, withholding taxes, managing super/pension contributions and complying with employment tax obligations.
PAYG (Pay As You Go) withholding is an Australian system where employers withhold tax from employee wages and remit it to the ATO on their behalf.
Superannuation (super) is Australia's mandatory retirement savings system. Employers must contribute a percentage of each eligible employee's earnings to a compliant super fund.
Operating expenses are the day-to-day costs of running your business, excluding COGS. They include rent, wages, utilities, marketing, insurance and administrative costs.
Accrued expenses are costs your business has incurred but not yet been billed or paid for. They are recorded as current liabilities to accurately reflect your obligations.
Connect Xero, check the AI's suggestions and approve the changes. SortBooks updates Xero for you.