How would I set up an escrow account for employee paid commissions?

drew93 · ‎November 16, 2022

Hello,

We have employees that make an hourly rate and a commission rate based on policy sales and retention. We plan to pay a base commission per policy sold and hold 20% of that amount in case the policy should cancel or reverse. What would be the best way to set up an escrow type account that we could hold the 20% in until it is paid out to the employee or is used to recoup funds from canceled policies? (Hoping that all makes sense!) Thank you!

BigRedConsulting · ‎November 17, 2022

The money you hold back is a presumed liability to your company, so set it up as a liability account. Then make entries in the account register using the employee names and - probably - the expense account you normally use for commissions.

Then later, when you decide to pay out the amounts, use a a payroll earnings item on the employee paychecks that uses the commissions liability account.

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How would I set up an escrow account for employee paid commissions?

How would I set up an escrow account for employee paid commissions?

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