Accrued wages are earnings you’ve already worked for but haven’t been paid yet. Because employers pay after work is performed rather than in real time, almost every worker has some accrued wages at any given moment. On the employer’s books, that unpaid amount sits as a liability until payday, when it moves from an obligation to a cash payment.
What Counts
Regular hourly pay and salary are the most obvious pieces. If you’re paid biweekly and you’ve worked six days since your last check, those six days are accrued wages. The same is true for hourly workers whose timecards show hours between pay periods.
Overtime accrues the moment extra hours are worked. Federal law sets the threshold at 40 hours in a workweek, after which covered employees must be paid at least one and a half times their regular rate for every additional hour.1Office of the Law Revision Counsel. 29 U.S. Code 207 – Maximum Hours An employer doesn’t have to cut the overtime check on the spot, but the obligation exists the instant the 41st hour is worked.2eCFR. 29 CFR Part 778 – Overtime Compensation
Commissions work a little differently. A sales commission counts as earned compensation that must eventually be included in your regular rate, regardless of when the employer calculates or pays it.2eCFR. 29 CFR Part 778 – Overtime Compensation If the employer needs extra time to calculate the amount after the regular payday, payment can be delayed temporarily. Once the amount is known, any additional overtime compensation that should have been included has to be paid retroactively, apportioned back over the workweeks in which it was earned. Shift differentials, hazard pay, and performance bonuses that have been earned also accrue as obligations before they appear on a paycheck.
How the Amount Is Figured
For hourly employees, the math is simple: hours worked times the hourly rate, plus overtime at the 1.5x multiplier for hours past 40 in a workweek. For salaried employees, divide the annual salary by the number of pay periods and prorate for any partial period.
The complication shows up at the edges of accounting periods. Suppose a company’s fiscal month ends on a Wednesday but payday isn’t until Friday. Under generally accepted accounting principles, the business has to record those three days (Monday through Wednesday) as an accrued liability in that month’s books, even though the check won’t go out until the following month. Expenses belong to the period when the work was performed, not when the check is cut. Skipping that step would understate the company’s liabilities and overstate its profits.
The gross accrued amount and the net payment you actually receive are two different figures. Federal income tax, Social Security, Medicare, and any state or local taxes come out of the gross. Court-ordered garnishments for consumer debt can take up to 25 percent of disposable earnings, and child support garnishments can reach 50 to 65 percent depending on your circumstances.3U.S. Department of Labor, Wage and Hour Division. Fact Sheet #30 – Wage Garnishment Protections of the Consumer Credit Protection Act (CCPA) The employer’s accrued liability reflects the full gross; deductions reduce what you take home, not what the company owes overall.
When Accrued Wages Get Paid
No federal law dictates how often private employers must run payroll. Pay frequency rules come from state law, and most states require at least semimonthly or biweekly pay. Some allow monthly pay for certain categories of workers. The one federal rule on pay frequency applies only to workers on federal contracts, where pay periods cannot be longer than semimonthly.4eCFR. 29 CFR 23.250 – Frequency of Pay
Overtime follows the same payroll calendar. It must be paid on the regular payday for the period in which the overtime was worked. If the employer genuinely can’t calculate the correct amount in time, payment can slip briefly, but not beyond the next payday after the calculation is possible.2eCFR. 29 CFR Part 778 – Overtime Compensation
How Taxes Work on Accrued Wages
Accrued wages create a timing gap that matters for taxes. Federal employment taxes are triggered when wages are actually paid, not when they accrue on the books. The IRS is explicit that deposit rules run on the cash basis, keyed to the dates wages are paid, not the dates liabilities accrue for accounting purposes.5Internal Revenue Service. Publication 15 (2026), (Circular E), Employers Tax Guide Federal income tax, Social Security, and Medicare withholding all come out of each wage payment at the time that payment is made.
For employees, this means accrued wages sitting on the employer’s books are not yet taxable income to you. Under the constructive receipt doctrine, income becomes taxable when it’s credited to your account and you have control over it, not before.6eCFR. 26 CFR 1.451-2 – Constructive Receipt of Income Wages you’ve earned but that haven’t hit your bank account or been made available to you aren’t constructively received. Your W-2 reports wages paid during the calendar year, not wages accrued.
Accrued Wages When Employment Ends
The rules tighten when someone leaves a job. Federal law does not require employers to hand over a final paycheck immediately. The FLSA only requires that the last check arrive by the next regular payday.7U.S. Department of Labor. Last Paycheck State laws often impose much shorter deadlines. Some states require immediate payment when an employee is fired; others allow anywhere from 24 hours to the next scheduled payday depending on whether the worker quit or was terminated. Checking your state labor department’s rules before your last day is worth the five minutes.
Unused Paid Time Off
Whether accrued vacation or PTO counts as wages owed at separation depends entirely on state law and your employer’s written policy. The FLSA does not require payment for time not worked, including vacations and sick leave. The DOL treats these benefits as a matter of agreement between employer and employee.8U.S. Department of Labor. Vacation Leave Some states treat earned vacation as wages that must be paid out at termination regardless of company policy; others allow use-it-or-lose-it rules. Where an employer has a written PTO payout policy, that promise generally creates an enforceable obligation even in states without a mandatory payout law.
If Your Employer Files for Bankruptcy
Accrued wages don’t disappear when an employer goes bankrupt, but collecting them gets harder. Federal bankruptcy law gives unpaid wage claims priority status, so they get paid before most other unsecured creditors. To qualify, the wages must have been earned within 180 days before the bankruptcy filing or the date the business stopped operating, whichever came first. The maximum priority amount per employee is $17,150 as of the adjustment effective April 1, 2025.9Office of the Law Revision Counsel. 11 USC 507 – Priorities Anything above that cap becomes a general unsecured claim, which often means pennies on the dollar or nothing at all. The priority also covers earned vacation, severance, sick leave, and sales commissions.
If You’re Not Paid What You’ve Earned
An employer that fails to pay earned wages faces real consequences. The FLSA allows recovery of the full unpaid amount plus an equal amount in liquidated damages, effectively doubling what the worker collects.10Office of the Law Revision Counsel. 29 U.S. Code 216 – Penalties The Department of Labor can also go to federal court to stop ongoing violations, including failures to keep proper records and retaliation against workers who complain.11U.S. Department of Labor. Handy Reference Guide to the Fair Labor Standards Act
If you believe your employer owes you wages, you can file a complaint with the DOL’s Wage and Hour Division, which investigates and can recover back wages on your behalf. You can also file a private lawsuit under the FLSA. Many state wage-and-hour laws provide additional penalties, including daily penalties that accumulate for each day payment is late, and these often stack on top of the federal ones. Federal law also requires employers to keep payroll records for at least three years from the last date of entry,12eCFR. 29 CFR 516.5 – Records to Be Preserved 3 Years which sets the practical boundary for how far back an investigation of unpaid wages can reach using employer documents.