Benefits Percent - Multi-Pedia

Benefits As a % of Salaries = Total Benefits/Total Salaries

This percentage represents benefit expense as a percentage of salaries, not including contract labor. Examples of benefits are health insurance, dental insurance, worker's compensation, pension and retirement plans, etc. They do not include PTO or vacation pay. Benefits in a typical Hospice run approximately 22%-25%.

Benefits in the Chart of Accounts

Many Hospices have a Chart of Accounts with "tons" of accounts for benefits. Every department or discipline has accounts for every type of benefit. We encourage a Hospice to be somewhat "anal-retentive" about breaking out personnel costs since they comprise 60-75% of a Hospice's costs. If you had benefit accounts for each, you would increase the size of your COA by hundreds of accounts. The solution is easy. Only use a master account for each type of benefit. By this, I mean you would have an expense account for:

Health Insurance
Life Insurance
Dental Insurance
FICA (company portion)
SUI
Retirement, Pension, 401K, Annuity
Workers Compensation
Other Benefit

You would then allocate benefits as a percentage of Salaries and Wages on financial statements. This is a more efficient way of tracking benefits. Here are advantages to using master accounts for benefits:

It reduces the number of accounts.
With fewer accounts, it is easier to reconcile the account. If you have 50 Dental Insurance accounts, it is just more difficult to track.
Benefits are NOT a controllable cost for managers. In a true responsibility accounting environment, you only hold people accountable for costs they can control. I have never heard a Clinical Manager say, "I'm over budget in health insurance. Betty Lou, you're going to have to drop your coverage!"
It is easy to make reports in F9 that allocate benefits as a percentage of salaries... so you aren't giving up anything.
Medicare auditors prefer benefits allocated on a percentage basis rather than actual.

Though most accountants are anal-retentive, this is one area where it is not necessary. Also, if your auditors want you to change from this master account approach to a break-out of 200 accounts... DON'T!