UK Secondment accounting entry


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What is the accounting entry for a secondment? Does it need to be transferred from Gross wages to what? Does the cost need to be recharged to the new division/department? If overheads are adsorbed on no. heads (percentage), how these can be allocated to the department? In addition to the gross salary, what other information I need? What further action should be taken?
 
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Werner Reisacher

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There is no "one answer fits all" to this question.
It mainly depends on the size of the company and the sophistication of the corporate process and procedure manuals in place.
A temporary assignment of a "seconded employee" to eighter another department/division or to an outside third party impacts the legal situation of all three parties involved. Therefore, such situations are usually based on a contractual agreement approved and signed by all three parties.
In addition, as you correctly question, it impacts how the # of FTE and the $ amount of costs involved is allocated between the two parties involved.
The accounting entries will have to be in line with the applicable policy and procedures of the company or if this is a new situation that is not covered in the manuals, the instructions giving to the accounting department by the authorized officers in writing.
 
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Fidget

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In my experience, accounting for secondees in/out is quite straightforward. One of two things happens:

1. The secondee remains on the original employer's payroll and invoices the other employer. Where this happens, the secondee's pay details go into the ledger as normal and are then accrued as owing by the other employer - so it effectively cancels out the pay in the P&L and sits as a debtor in the balance sheet until the other employer pays the bill.

2. The secondee goes on the other employer's payroll.

Any other costs are usually picked up by the other employer, although that's something that needs agreed between the two employers so, as usual, the devil is in the detail.

Something to beware of with secondments though, is that they can be subject to VAT as a supply of services.
 

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