Payroll Provisions: Accounting for Paid Leave and Bonuses at Year-End

Many business owners discover at year-end that their result is lower than expected, with no obvious cause. The culprit is often invisible all year: the liability for accrued but unused paid leave, the 13th month being earned, and annual bonuses already earned but not yet paid. These payroll commitments exist legally well before payment. If they are not recognised at the closing date, the result is artificially inflated, and the catch-up hits the following year.

This article explains how to calculate these payroll provisions, which entries to post (including the change to the chart of accounts applicable since 2025), and which pitfalls we see most often in client files.

At year-end, you must recognise as accrued charges the paid leave earned but not taken, as well as bonuses and the 13th month already earned over the period. The indemnity is recorded by debiting account 6412 and crediting 4282; the social charges by debiting 645 and crediting 4382; the tax charges (including the payroll tax where applicable) by debiting 631 or 633 and crediting 44811. These liabilities are in principle tax-deductible if they are certain in principle and in amount at the closing date.

The payroll provisions discussed here are, for the most part, accrued charges: liabilities whose principle and amount are known at the closing date, even if the due date or cash outflow occurs later. Everyday language refers to a paid-leave provision, but in accounting terms this is a liability estimated with high reliability, not a provision for an uncertain risk.

Three commitments come up systematically:

• paid leave earned over the reference period and not yet taken at year-end;
• the 13th month or year-end bonus earned pro rata temporis over the period;
• variable bonuses (targets, performance, contractual profit-sharing) already earned but paid after the closing date.

To these gross amounts you must add employer social charges and, where applicable, the tax charges levied on wages. It is the total that must appear as a liability, not just the net indemnity.

In client files, the most frequent mistake is not forgetting paid leave; it is provisioning only the gross indemnity and forgetting the charges that weigh on it. A paid-leave liability of 30,000 euros gross actually represents, employer charges included, a significantly higher commitment. Provisioning only the gross figure underestimates the liability by roughly a third and shows an overly optimistic result.

The second classic omission concerns contractual or customary bonuses. A target-based bonus relating to the calendar year, paid in January or March of the following year, is economically attributable to the closed period. If the principle is acquired at year-end (target met, established practice, contractual commitment), it must be recognised, even if the exact amount is refined afterwards.

The calculation is based on the rights earned but not taken at the closing date, valued at the rate applicable when leave is taken. In practice, you keep the amount most favourable to the employee between the one-tenth rule (one tenth of the remuneration over the reference period) and the salary-maintenance rule. For the detail of accrued rights and the 2026 rules, see our article on the 2026 paid leave calculation rules.

The operational method, for a period aligned with the calendar year:

1. Extract from payroll the balance of leave days earned and not taken per employee at year-end.
2. Value those days at each employee's daily rate (using the most favourable rule).
3. Add them up to obtain the gross paid-leave indemnity to be provisioned.
4. Apply the company's own employer-charge rate to obtain the social charges.
5. Add, where applicable, the tax charges levied on wages (payroll tax if the company is liable).
6. Account for the whole as accrued charges (see the entries table below).

For the 13th month and annual bonuses, the logic is identical: you attribute to the period the fraction earned pro rata temporis, plus the corresponding charges.

Here is the standard year-end scheme. Important point: the chart of accounts has changed. ANC regulation no. 2022-06, in force since 1 January 2025, removed the former accounts 4482 and 4486 in favour of account 44811 Tax charges on leave payable. If you reuse an entry template from before 2025, this point needs correcting.

At the start of the following period, these entries can be reversed, the actual payment and the social declarations clearing the accounts. Tracking this cycle precisely is at the heart of sound bookkeeping and accounting review.

The most common friction point in practice is the absence of reconciliation between the paid-leave statement from the payroll software and the liability recorded in accounting. Two typical symptoms:

• the leave balance on the payslip and the provision statement do not match, because the reference period, carry-overs or advance leave are not treated the same way;
• the employer charges applied to the provision do not match the company's actual rate (reliefs, exemptions, ceilings), which distorts the provisioned amount.

Our recommendation: at each year-end, start from the payroll paid-leave statement as the single supporting document, reconcile it with class 42 and 43 accounts, and document the charge rate used. It is this reconciliation that secures deductibility and avoids surprises during an audit.

Paid-leave liabilities and accrued charges are in principle deductible in the period of their commitment, provided they are certain in principle and assessed with sufficient approximation at the closing date. For a bonus, deductibility requires a firm commitment before year-end (decision, established practice, contractual clause), not a mere intention.

The classic tax watch-point: a bonus decided after year-end, with no prior commitment, cannot be attributed to the closed period. Likewise, a poorly documented paid-leave provision that is not reconciled with payroll is an easy target for reassessment. The general logic is in line with that of provisions for liabilities and charges and their deductibility, which we detail elsewhere.

An SME closes its accounts on 31 December. Several managers receive an annual target bonus, calculated on the calendar year and paid in March after results are validated. On 31 December, the targets are met and the commitment is contractual: the bonus is acquired in principle. It must therefore be recognised as an accrued charge of the closed period, social charges included, even if the final amount is set a few weeks later. Forgetting it would artificially shift a charge to the following period and distort the comparison between the two years.

• Issue the statement of paid leave earned and not taken per employee at the closing date.
• Value it using the most favourable rule (one-tenth or salary maintenance).
• Add the 13th month and bonuses earned pro rata temporis.
• Calculate employer social charges at the company's actual rate.
• Add tax charges on wages if the company is liable.
• Post the entries with the up-to-date accounts (4282, 4382, 44811).
• Reconcile the accounting provision with the payroll statement and keep the supporting evidence.
• Check deductibility (principle acquired and commitment certain before year-end).