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The payroll entry: what is an expense and what is only a withholding

The single distinction that keeps a payroll entry honest — and the reason your staff costs are neither the net pay nor the amount you transfer to social security.

7 min readTicuenta
The rule that orders everything: the expense is the gross salary, the employer contributions and the provisions. The employee contributions, the salary withholding tax and the other deductions are not an expense: they are already inside the gross and they come out of the net.

The entry, with figures

A month with ₡1,800,000 of gross salaries, employer contributions of ₡480,060, employee contributions of ₡192,060, ₡18,200 of salary tax withheld and ₡45,000 of court-ordered maintenance:

The month's payroll

AccountDebitCredit
Wages and salaries1,800,000—
Employer social security480,060—
Holiday provision (4.16 %)74,880—
Christmas bonus provision (8.33 %)149,940—
Social security payable—672,120
Salary tax withheld, payable—18,200
Other salary deductions payable—45,000
Salaries payable (net)—1,544,740
Holiday provision payable—74,880
Christmas bonus provision payable—149,940
Look at “social security payable”: it is ₡672,120, not ₡480,060. That account gathers both the employer contributions (the company's expense) and the employee ones (deducted from the worker). Both are remitted in the same payment, but only one of the two went through the income statement.

How the net is reached

₡1,800,000GrossWhat was earned
− ₡255,260DeductionsEmployee, tax, other
₡1,544,740NetWhat is received
The company's expense is not the net: it is the gross plus the employer part plus the provisions.

The three provisions, and why one is at zero

ProvisionUsual % of grossHow it is released
Holiday4.16 %When the employee takes it
Christmas bonus8.33 %With the December payment
Severance0 %In a settlement, if there is one
Severance at zero is an accounting decision, not an oversight. Holiday and the Christmas bonus are certain liabilities: they will be paid either way. Severance is contingent — it is only paid on a dismissal without cause — so accruing it every month overstates the liability. Leave it at zero unless your accounting policy says otherwise.

Where it is accrued, watch where it lands: a severance provision is a non-current liability. It is not expected to be settled within the year, and putting it among current liabilities makes the liquidity read worse for no reason.

Holiday taken is not a new expense

The salary for the holiday days already went to expense month by month, inside the provision. When the employee takes it, that amount draws down the accumulated provision: the liability is debited, it is not charged to wages again. How holiday is calculated.

What does not change is the gross: social security and the salary tax are still calculated on everything earned, holiday included.

A mid-month advance is not an expense either

It is a receivable from the employee. It is recorded against “salary advances to employees” and deducted from the net when the month's payroll comes. Charging it straight to wages doubles the expense.

And social security fines and surcharges go separately, and do not deduct. They are paid along with the social security bill, but it is worth keeping them in their own account: at year end they have to be added back in the tax reconciliation. What else does not deduct.

The accrual is monthly even when the pay is fortnightly

Paid weekly, fortnightly or monthly, the accrual and the social security are monthly. What is done in parts is the payment, which is recorded separately and admits instalments.

From Ticuenta

A payroll entry that balances on its own

Bring the month's social security figures and the entry comes out complete: the provisions calculated and the net broken out before it is saved.

See how it works

About this article. The amounts in the example are illustrative. Social security rates vary by company — small business regime, part-time hours — so the entry has to be built from the real figures on the social security bill, not by applying percentages from memory.

Verified as of 24 September 2026. Rules change. This is information, not legal or tax advice.

Sources: Costa Rican Social Security Fund

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