Employee benefits are withheld from employees' gross pay and remitted to benefit providers. Recording them correctly requires both the employee's withheld portion and (if applicable) the employer's matching contribution.
Employee benefit withholding in the journal entry
Employee benefit deductions reduce net pay. They appear as credits to liability accounts in the payroll journal entry:
| Benefit | Account | Treatment |
|---|---|---|
| Health Insurance (employee share) | Health Insurance Payable | Credit (liability) |
| Dental/Vision (employee share) | Dental/Vision Payable | Credit (liability) |
| 401(k) contribution | 401(k) Payable | Credit (liability) |
| HSA contribution | HSA Payable | Credit (liability) |
| FSA contribution | FSA Payable | Credit (liability) |
Employer benefit contributions
If the employer pays part of health insurance or matches 401(k) contributions, that's an additional expense:
| Account | Debit | Credit |
|---|---|---|
| Employee Benefits Expense | $1,200.00 | |
| Health Insurance Payable | $900.00 | |
| 401(k) Match Payable | $300.00 |
Complete example with benefits
| Account | Debit | Credit |
|---|---|---|
| Wages Expense | $10,000.00 | |
| Payroll Tax Expense | $1,153.00 | |
| Employee Benefits Expense (employer share) | $800.00 | |
| Federal WH Payable | $1,500.00 | |
| FICA Payable | $1,153.00 | |
| Health Insurance Payable | $1,200.00 | |
| 401(k) Payable | $600.00 | |
| Net Wages Payable | $7,500.00 | |
| Total | $11,953.00 | $11,953.00 |
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