 Hello in this lecture we will define employee benefits. According to fundamental accounting principles Wild 22nd edition the definition of employee benefits is additional compensation paid to or on behalf of employees such as premiums for medical dental life and disability insurance and contributions to pension plans. When we're thinking about employee benefits we're really thinking about those types of compensations that are not cash most of the time. Anything that we are receiving from the employer is thought to be some form of compensation. The reason we're receiving something is because we are working for the employer and the employer is providing some type of compensation. We generally think of compensation in the form of cash but anything we receive would be some form of compensation. Why would an employer provide some of these other forms of compensation? One of the main reasons is that there's tax benefits to them. So the fact that we're getting something that is coming from the employer means that it's going to be a type of compensation. The concept of whether it should be taxed or not is a different concept but it's a related concept because that's really what drives oftentimes forms of compensation that are outside of just a cash compensation. If we take a look at the W-2 for example we could have certain types of fringe benefits. Again fringe benefits being things that we are receiving that aren't cash and note that some of those fringe benefits at least are still going to have to be reported on the wages in terms of line one on the wages, wages that we would then have to report and be taxed on. We could have some type of employer contributions to long-term care which again we would have to be reported in certain cases as wages and therefore be taxed on. If we look at the social security wages this is going to be wages related to payments of social security just to show the difference in these types of wages from for federal income tax to social security to Medicare. This will include employee contributions to the retirement plan. Note what the difference here is that in line one of the W-2 doesn't always report accurately what the actual wages are for the employee because we could have pulled some things off that are not taxable but are really still compensation. For example if the employee put money into a 401k or some type of retirement plan it's possible that's not included in line one because it's going not going to be taxable but it is still a form of compensation. Now it can be thought that the amount that the employee puts into the 401k plan or any retirement plan is not exactly a employee benefit because the employee is the one that put that in there. But in another sense at another level the fact that there is the option to put money into a 401k plan is a large benefit to employees in the sense that the employee can put a lot more money into into that retirement plan than they otherwise would be able to most of the time if they were having to put something set up their own IRA account or something like that. So the point is that line one of the W-2 isn't always the most accurate reporting of what was actually earned during the year. Line three the social security wages could have a cap on it. Oftentimes the Medicare wages is actually the most accurate number in terms of what was actually earned in terms of the W-2. If we look down here in line 12 we could have the reporting of the employer contribution to the retirement plan. This would be an employee benefit. This would be something like a matching concept where the employer is going to put some money, match some money into that retirement plan and getting that tax benefit from doing so. That wages those wages not being reported in line one. We could have employer contributions to a health savings account similar type of idea. We could have an employer sponsored sponsored health coverage. Again similar ideas there's there's tax incentives for these and that's really what often drives the the necessity for that to happen. The employer is able to give the employee more by allowing these tax cuts and these tax breaks. Accounting. I don't know anyone in accounting.