Is the encumbrance procedure always necessary for salaries and wages?

The policy surrounding the encumbrance of salaries and wages in governmental accounting often allows for flexibility, and it is accurate to say that salaries and wages are frequently not encumbered. One of the key reasons for this is that salaries and wages are typically considered recurring expenditures that occur regularly and are based on established payroll schedules. Since they are predictable and can be easily tracked against the overall budget, many government entities do not find it necessary to create encumbrances for these types of expenditures.

Encumbering funds is more critical for variable expenses, such as goods or contracted services, which may not be as predictable or could vary significantly throughout the fiscal period. By not encumbering salaries and wages, governments streamline their accounting processes and avoid unnecessary complications that could arise from tracking these routine expenses as encumbrances. Therefore, it's common practice to manage payroll directly through budget monitoring without the encumbrance procedure.