Accrued Employee Compensation

Accrued employee compensation consists of accrued wages, commissions, bonuses, payroll taxes, vacation, payroll deductions for employee stock purchase plan (“ESPP”) and other employee benefit payroll deductions.

The employer's portion of the FICA, unemployment taxes, worker compensation insurance, and other benefits pertaining to those wages should also be included as accrued payroll in order to achieve the matching principle of accounting (your current asset must be financed by your current liabilities).

These liabilities get on your balance sheet because of the difference in time between the moment, 

when they are accrued and when they are actually paid. For example, the accrued payroll as of December 31 would include all of the wages that the hourly-paid employees have earned as of December 31, but will not be paid until the following pay day (perhaps January 5).

Naturally, the longer this period – between accruals and actual payments, the better for the company cash situation which can obtain additional financing from accrued liabilities. Within the reasonable limits, of course.