027 Employee Benefits

Expenses

Personnel

Synopsis

The cost of Employee Benefits such as life, health, dental and other insurance is recorded in Account 027, Employee Benefits.

Debits

Credits

The cost of insurance premiums paid or accrued for Employee Benefit plans such as:

a. Health insurance

b. Life insurance

c. Dental insurance

d. Long Term Care Insurance

The amount of employee contribution to various benefits

Example 1

Record the $5,500 monthly expense of workers’ compensation insurance that was paid in advance. The workers’ compensation insurance is distributed to each department as shown in the example below.

Journal: Standard Entries Journal

Entry:		Debit	Credit
Account 027-01	Employee Benefits – New Vehicle Department	$1,430
Account 027-02	Employee Benefits – Used Vehicle Department	$605
Account 027-03	Employee Benefits – Lease & Rental Department	$165
Account 027-05	Employee Benefits – Mechanical Department	$1,375
Account 027-06	Employee Benefits – Body Shop Department	$825
Account 027-07	Employee Benefits – Parts & Accessories Department	$715
Account 027-09	Employee Benefits – General & Administrative	$385
Account 271	Prepaid Insurance		$5,500

Distribution of Expenses

	Departmental Distribution
027 Employee Benefits	New Veh.	Used Veh.	Lease & Rental	Mechanical	Body Shop	Parts & Access.	Gen & Admin.
	01	02	03	05	06	07	09
Group life insurance	Employees participating	Employees participating	Employees participating	Employees participating	Employees participating	Employees participating	Employees participating
Hospitalization, health, accident and long term care insurance	Employees participating	Employees participating	Employees participating	Employees participating	Employees participating	Employees participating	Employees participating
Laundry coverall and uniform service	Usage	Usage	Usage	Usage	Usage	Usage	Usage
Workers’ compensation insurance	Employees	Employees	Employees	Employees	Employees	Employees	Employees

Comments

In the area of insurance, there is a wide range of costs and coverage between policies. Comparisons should be made to determine which provider and which plan best suits the needs of the dealership and its employees. In addition to low cost, finding the best value should be a main criterion for selecting the coverage.

The cost of Employee Benefits should be charged to each Department in proportion to the employees assigned to the Department.

Note:

One secret to attracting and retaining good employees is to provide Employee Benefits that satisfy employee needs. For this reason, the insurance plans that offer employee choices have become popular. The same is true for other fringe benefits. The cost of Employee Benefits must be weighed against the cost of recruiting, hiring and training new employees and riding out the “learning curve” until productivity becomes acceptable.

Departmental Distribution