Question

What is the difference between Salary Expense and Pension Expension?

Answer 1

Both Salary and Pension expense are paid to employee but they differ a lot in their concept and nature.

Salary Expense -

Salaries expense is the fixed pay earned by employees. The expense represents the cost of non-hourly labor for a business. A salary is a fixed amount paid to an employee over a predetermined period of time; it is not based on the number of hours worked or number of units produced, and so should not change from period to period, unless a pay raise or reduction is implemented.

Pension Expense -

Pension expense is the amount that a business charges to expense in relation to its liabilities for pensions payable to employees. The amount of this expense varies, depending upon whether the underlying pension is a defined benefit plan or a defined contribution plan. The characteristics of these plan types are as follows:

• Defined benefit plan. Under this plan, the employer provides a predetermined periodic payment to employees after they retire. The amount of this future payment depends upon a number of future events, such as estimates of employee lifespan, how long current employees will continue to work for the company, and the pay level of employees just prior to their retirement..

• Defined contribution plan. Under this plan, the employer’s entire obligation is complete once it has made a contribution payment into the plan, as long as no associated costs are being deferred for recognition in later periods. Thus, the employer commits to pay a specific amount of funds into a plan, but does not commit to the amount of benefits subsequently distributed by that plan.

(For reference you can refer to Internet too.)

Hope it helps.

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