Definition of Payroll Withholdings for Health Insurance
Payroll withholdings for health insurance are the amounts deducted from employees' pay for their portion of the cost for the company's health insurance plan.
Example of Payroll Withholdings for Health Insurance
Assume that the cost of a company's health insurance plan is $300 per biweekly pay period and that the employee is responsible for paying 25% of the cost through payroll withholding. Therefore, the withholding is $75 per pay period.
One way to record the withholdings is to credit Health Insurance Expense for the $75 withheld from the employee. When the company pays the full cost of the health insurance plan it will debit the amount to Health Insurance Expense. The combination of the insurance company's billing amount and the amount withheld from the employee will result in the company's health insurance expense per biweekly pay period of $225 for the employee.
Another way to record the withholdings is to credit a current liability account such as Employee Withholdings for Insurance for the $75 withheld from the employee. When the company pays the insurance company's invoice, the current liability account will be debited for $75.
Either technique will result in the company having an expense for $225 per pay period for the employee.