COVID-19: How to account for employee costs when employees are (partly) absent?

COVID-19: How to account for employee costs

Employee expenses are recognised over the period in the profit and loss account as incurred.


Fred Versteeg

Partner Department of Professional Practice

KPMG Nederland


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What’s the issue?

It is a challenging time for companies and their employees. Companies may be forced to close their business temporarily, employees may work less hours than usual or less efficient or will have to work from home. Employees need to adjust in a short time to a new situation and ongoing measures which can make them unsure of what comes next, can possibly lead to higher absences and sick leaves. The question arises how to account for employee costs in these circumstances?

Getting into more detail

Companies normally recognise employee expenses at the undiscounted amount together with a liability for any amount unpaid, matching employee services rendered and the related expenses. This matching principle may, however, be reduced in the event that employees cannot work actively, work less or maybe work less efficient, as a result of the measures taken and the company continues to pay the employees.

In these circumstances the paid absences cannot be deferred as the entitlement to payment for the employee does not accumulate – i.e. cannot be carried forward to a future period. Furthermore, no provision can be recognised for future expected inefficiencies as a consequence of reduced working hours or a less efficient workforce. Therefore, these employee expenses are recognised over the period in the profit and loss account as incurred.

More information

In case of any queries please contact:

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