Net Wages

This is a short-lived holding account for wages that have been calculated but not yet paid out to employees' bank accounts — it should clear to zero once payday's payment run completes.

Real-world examples

Retail and hospitality

A retail or hospitality business paying its workforce weekly posts to 2220 every week rather than once a month — each week's net pay is calculated, credited to 2220, then cleared out again within a day or two once the BACS run reaches staff accounts. Because it turns over so often, an unexplained balance sitting in 2220 for more than a few days is usually a quick sign that a particular week's payment run didn't complete properly.

Professional services

A professional services firm paying salaried staff monthly only posts to 2220 once a month, for a single larger figure covering the whole payroll rather than dozens of smaller weekly runs. A month's net pay of £42,000 for the team is a credit of £42,000 to 2220, cleared with a debit of £42,000 once the single monthly BACS payment goes out — far fewer postings across the year, so discrepancies are rarer but can be larger when they do occur.

Commonly confused with

Because code 2211 (National Insurance) sits right next to this one in Current Liabilities, it's a common mis-posting target. Code 2220 is specifically for net wages, while 2211 covers national insurance — similar in nature, but keeping them separate is what makes the current liabilities section of your management accounts meaningful rather than a single lumped total.

What a mis-posting here costs you

An error posting to Net Wages misstates what the business owes, and for a Current Liabilities code specifically it can distort the working capital and current ratio that lenders and suppliers look at when assessing short-term financial health.

Other codes in Current Liabilities