Chapter 11
Payroll
332
amount is paid to the employee during his time off. When the vacation pay is paid out, statutory
deductions and any other deductions must be withheld.
The last portion of a payroll journal entry is to record the employer's portion of the statutory
deductions, plus any other contributions it makes for its employees. In this example, the employer
will pay the following
• match the employees' CPP deduction of $208.31
• pay 1.4 times the amount of the employees' EI deduction of $118.44
• the health insurance plan costs $30 per month, however the employer pays for half of it
• workers’ compensation is assumed to be 0.5% of gross pay
On January 31, 2015, the journal entry to record the employer contributions is shown in Figure
11.5.
Journal Page 1
Date
2015
account title and explanation Debit credit
Jan 31 Employee Benefits Expense
364.25
CPP Payable
208.31
EI Payable
118.44
Health Insurance Payable
15.00
Workers’ Compensation Payable
22.50
To record employer payroll expenses
CPP PAYABLE
EI PAYABLE
HEALTH INSURANCE PAYABLE
WORKERS’
COMPENSATION PAYABLE
-
-
-
-
+
+
+
+
Employee deduction
Employer contribution
Employee deduction
Employer contribution
Employee deduction
Employer contribution
84.60
118.44
203.04
208.31
208.31
416.62
22.50
15.00
15.00
30.00
______________
FIGURE 11.5
The employer portions (CPP, EI and the health insurance plan) are added to the existing liability
accounts. These liability accounts already have the employee portions recorded in them from
Figure 11.3. Workers’ compensation is solely the responsibility of the employer. A single expense
account called employee benefits expense is used to record the extra employer expenses. Some
companies prefer to have separate expense accounts for each of the employer contributions;
however, we will only use one expense account in this textbook.
An important point is that the $4,500 of gross payroll actually incurred expenses of $5,044.25
(gross pay, vacation pay and employee benefits expenses).This means that in our example, for every
$1 of gross payroll, the actual cost to the business is approximately $1.12. Payroll can be much
more expensive to a business than the amount received by employees, depending on the types and
amounts of benefits that the business pays.
