If you use payrolled benefits, you may notice that the cost of a benefit can vary from one period to another, depending on changes made to the benefit record or if the employee decides to leave. Below is the calculation used by SelectPay, along with some examples of how it works.
Calculation
Value to deduct = (Cash Equivalent - Benefit YTD) ÷ tax year periods remaining
Benefit starting at the beginning of the tax year
The benefit cost to you value was 1200.00 starting in April.
Month 1 = 1200.00 ÷ 12 = 100.00
Month 2 = (1200.00 - 100.00) ÷ 11 = 100.00
Month 3 = (1200.00 - 200.00) ÷ 10 = 100.00
Month 4 = (1200.00 - 300.00) ÷ 9 = 100.00
Month 5 = (1200.00 - 400.00) ÷ 8 = 100.00
Month 6 = (1200.00 - 500.00) ÷ 7 = 100.00
Benefit starting in May
The benefit cost to you value was 1200.00 starting in May.
Month 2 = 1200.00 ÷ 11 = 109.09
Month 3 = (1200.00 - 109.09) ÷ 10 = 109.09
Month 4 = (1200.00 - 218.18) ÷ 9 = 109.09
Month 5 = (1200.00 - 327.27) ÷ 8 = 109.09
Month 6 = (1200.00 - 436.36) ÷ 7 = 109.09
Month 7 = (1200.00 - 545.45) ÷ 6 = 109.09
Benefit cost changes mid-year
The benefit cost to you value was 1200.00 starting in April, and in July increases to 1500.00.
Month 1 = 1200.00 ÷ 12 = 100.00
Month 2 = (1200.00 - 100.00) ÷ 11 = 100.00
Month 3 = (1200.00 - 200.00) ÷ 10 = 100.00
Month 4 = (1500.00 - 300.00) ÷ 9 = 133.33
Month 5 = (1500.00 - 433.33) ÷ 8 = 133.33
Month 6 = (1500.00 - 566.66) ÷ 7 = 133.33