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Employee benefits, Post employment plans, Short term compensated absences,…
Employee benefits
What are they
benefits provided in exchange for service rendered by employee while or after employment
4 types
Long-term benefits
greater than 12 months after service rendered
Post-employment benefits
payable after completion of employment
Short-term beneftis
Termination benefits
examples
free goods/services
salary
Short-term employee benefits
settled within 12 months after service has been rendered
examples
paid annual leave
paid sick leave
contributions by employer
profit sharing and bonuses
wages and salaries
medical aids and other non monetary benefits
1.) Raising a short term employee benefit expense: Employee contribution :star:
2.) Raising a short term employee benefit expense: Employer contribution
:star:
3.) Paying employee salary and contributions
(net salary)
Post employment plans
two categories of post employment plans
defined contribution plans
amount received by employee limited to contributions made plus return on investment
actuarial risk falls on employee
An entity pays
fixed contributions
into a separate entity (a fund) and will have no legal or constructive obligation to pay further contributions
defined benefit plans
pension fund: consist of
a defined benefit obligation - the promised benefit owing
Plan assets - assets used to service or fund the obligation
A lot of actuarial estimates are necessary to determine the future benefit to be paid e.g.) inflation, salary, expected working life, expected promotions
Amounts to be paid are determined using a formula based on employees remuneration and/or years of service
due to an employee after ceasing to be an employee of the company
Types of benefits
Retirement- pension and provident fund payments
Post employment life insurance and post employment medical care
Short term compensated absences
Non-Accumulating
Entitlement not carried forward and employee not entitled to cash payments on resignation
Only recognise if employee takes leave in current leave cycle
Accumulating
Vesting
Employee entitled to cash payments on resignation
recognise total liability at current salary tariff amounts
= expected number of days * tariff per day
(salary /working days)
Raise liability or accrual. e.g) of a leave pay expense accrued
Non-Vesting
Employee not entitled to cash payments on resignation
Record provision
Profit sharing and bonus plans
Recognise expected cost of profit sharing and bonus payments only when
when an organisation has a present legal or constructive obligation to make payment
present obligation exist when entity has no realistic alternative but to make payment
A reliable
estimate
of the obligation can be made
Journals
Cr
SARS payable :star:
Cr Salary payable
Cr
Provident fund payable :star:
Dr Short term employee benefit
Cr
Medical Aid payable :star:
900
6 250
10 000
750
2 100
Employee contribution
Cr
UIF payable :star:
Dr Short term employee benefit expense
Cr
Medical aid payable :star:
Cr
Provident fund payable :star:
100
750
900
1 750
Employer contribution
Dr
Provident fund Payable
Dr
Medical Aid Payable
Dr
UIF Payable
Cr
Bank
Dr
SARS Payable
Dr
Salary payable
6 250
1 800
2 000
1 500
200
11 750
Employer obligation
Cr.
Accrual for leave pay
Accrual raised for leave carried forward to 20.2
Dr.
Short term employee benefit expense
Dr.
Short term benefit expense
Cr
Leave pay provision
Dr.
Short term employee benefit expense
Cr.
Bank