Introduction to Employee Compensation and Pension Accounting
Why Employee Benefits Matter
Employee compensation includes salaries, wages, bonuses, stock-based compensation, pensions, and other post-employment benefits provided in exchange for employee services. U.S. GAAP requires companies to recognize the cost of these benefits in the periods employees earn them, even if payment occurs later.
Accurate accounting for employee compensation helps ensure expenses are matched with the services employees provide and that future obligations are reported appropriately.
Note
Employee benefit costs are recognized as employees earn the benefits—not necessarily when cash is paid.
- Short-term compensation.
- Deferred compensation.
- Stock-based compensation.
- Defined contribution plans.
- Defined benefit pension plans.
Summary
Employee compensation accounting ensures that compensation costs are recognized in the periods employees provide services.