Gross Wages

This Overheads code records the cost of gross wages incurred in running the business. As an expense account, it normally carries a debit balance: debit entries increase the balance (recording new costs) and credit entries decrease it (for example, correcting an error or a refund received).

Real-world examples

Hospitality

A restaurant's monthly payroll run totals £18,400 in gross wages across a mix of full-time chefs and casual front-of-house staff. Wages are outside the scope of VAT, so there's no 2201 Purchase Tax line at all — the entry is a debit of £18,400 to 7000 (Gross Wages) and a credit of £18,400 to 1200 (Bank Current Account) once net pay and the associated PAYE/NI are settled. Tips and service charges paid through an independent tronc scheme are usually kept out of gross wages entirely, since the tronc runs its own PAYE.

Retail (seasonal)

A shop's gross wages bill swings sharply through the year — a quiet February payroll of £9,200 can jump to £16,500 in December once seasonal Christmas staff are added. Because gross wages sit in one code, month-on-month comparisons in the management accounts need to account for this seasonality rather than reading a December spike as a cost overrun. The entry follows the same pattern regardless of headcount: debit 7000, credit 1200, with no VAT involved.

Manufacturing

A production site running round-the-clock shifts pays significant overtime and night-shift premiums, folded straight into gross wages rather than tracked separately — a typical weekly run might total £26,000 once premiums are added, against a £21,000 base, debited to 7000 and credited to 1200 in full. Because gross wages here moves with production volume rather than headcount alone, it's often flexed against output when reviewed, not just compared to the same period last year.

Commonly confused with

Because code 7001 (Directors' Salaries) sits right next to this one in Overheads, it's a common mis-posting target. Code 7000 is specifically for gross wages, while 7001 covers directors' salaries — similar in nature, but keeping them separate is what makes the overheads section of your management accounts meaningful rather than a single lumped total.

What a mis-posting here costs you

An error posting to Gross Wages won't change total overhead spend, but it will distort the overheads breakdown that's usually reviewed line by line each month to spot cost creep.

Other codes in Overheads