With small business it is very common to provide a vehicle to the owner and key employees. It is often done in the construction industry and transportation sector. The idea is to provide transportation for not only the convenience of the employer but as retention tool for employees.
One of the forms of indirect compensation, employee benefits include access to a retirement plans, forms of insurance (health, cancer, vision, dental, and life); vacation and personal time off. Some larger employers provide other forms of benefits especially for individuals involved in management. Most benefits are 100% covered by the employer or the employer agrees to subsidize the cost. For a more in-depth understanding, read: Employee Benefits.
After three decades of discussion, in-fighting and wrangling, Congress passed a health insurance mandate along party lines of vote. This health insurance mandate changed the rules for employers and affects the accounting department and in particular, the proper bookkeeping for the respective amounts paid by both the employer and employee.
Employee benefits consist of vacation, sick time, retirement benefits, healthcare and other de minimis benefits. As a function of accrual accounting these benefits are estimated and posted as a deferred liability in the accrued payroll section of the current liabilities section of the balance sheet. This lesson explains how to calculate the respective benefits and post this information to the books.
One of the best parts of being a bookkeeper is seeing employees smile when they utilize employee benefits. There are a multitude of different employee benefits out there including: 1) Health Insurance, 2) Retirement, 3) Life Insurance, 4) Dental Care, 5) Vision Care, 6) Cancer Insurance, 7) Disability Insurance and 8) Child Care.
Payroll is envisioned as the simple employer employee agreement related to compensation for services. I often think of this as the simple handshake whereby the employer agrees to pay the employee a set rate per hour of work. This was true a hundred or more years ago, but over time; history and governmental regulations complicated this simple relationship.
There are several different retirement plans available to the small business owner. But no plan offers so many advantages to small business as the Simple retirement plan. The positive attributes include: 1) Easiest to understand, 2) Least amount of paperwork, 3) No compliance reporting and 4) Plenty of flexibility. If you are in business and have less than 25 employees, this is your best option to include a great benefit for your employees.