Accrued benefits refer to the benefits that have been earned or accumulated but have not yet been paid or received. This term is used mostly in the context of retirement plans, pensions, or employee benefit programs. Accrual benefits are such benefits that an individual is entitled to receive at a later date and are based on their current entitlements.
Accrual benefits can be thought about like a saving jat that is filled by us over time. Every period, which could be a year of work, something is added to the jar. The jar can be opened only when a person retires. So, these benefits have been earned but they cannot be used now.
Accrued benefit as a concept in labour economics, human resources management, and personal financial planning plays an important role. They are crucial for understanding the long-term financial obligations of employers to employees. For individuals, they play a key part in their retirement planning.
For example, an employee participates in a pension plan where their accrued benefits increase each year they work. These benefits, which can be a portion of their salary, will be available to them upon retirement. In a company’s balance sheet, accrued benefits may appear as a liability, representing future payments the company is obligated to make to its employees.
Source: A to Z of Economics by Dr. NC Raghavi Chakravarthy