The Math Behind Benefits: How to Split Costs Correctly

Offering benefits is one of the best ways to attract and keep employees. But providing them is only half the battle — you also need to get the math right.

Benefits cost-sharing sounds simple: the company pays a portion, the employee pays the rest. But in practice, incorrect payroll deductions are one of the most common compliance mistakes small businesses make. And unlike a small math error in PTO, benefits math isn’t just an internal issue — it’s governed by federal law.

The Basics of Benefits Cost-Splitting

Let’s take an example:

• Total monthly premium = $600

• Employer covers 75% = $450

• Employee covers 25% = $150

That means $150 should be deducted from the employee’s paycheck. Easy, right?

But what happens if you pay biweekly instead of monthly? Or semi-monthly? Or if an employee’s coverage starts mid-cycle? Suddenly, that clean $150 deduction becomes a messy split that needs careful adjustment.

Where Benefits Math Goes Wrong

Some of the most common mistakes we see:

• Incorrect paycheck splits: Deductions don’t line up with the pay cycle, leaving employees over- or under-deducted.

• Mid-cycle enrollments: Coverage starts mid-month, but deductions don’t prorate correctly.

• Mismatched systems: Payroll system shows one number, benefits carrier shows another.

• Non-compliance with ERISA/ACA: Failing to document contributions correctly creates legal exposure.

Even a few dollars off, repeated across multiple employees and months, can create major reconciliation issues.

Why Benefits Math Is More Than Just Payroll

When benefits deductions are wrong, employees notice. If their paycheck feels short, it creates frustration. If they’re over-deducted, it may take weeks to fix — damaging trust. And if your books don’t match the insurance carrier’s records, you’re facing compliance problems, not just accounting headaches.

Benefits math isn’t just about accuracy. It’s about transparency, compliance, and employee confidence.

The PayLane Solution

PayLane ensures benefits math doesn’t slip through the cracks by:

• Aligning deductions with payroll cycles (monthly, biweekly, semi-monthly)

• Automating prorated deductions for mid-cycle enrollments

• Syncing with carriers so payroll and benefits records match

• Keeping you compliant with ERISA and ACA requirements

When benefits math is done right, employees see consistency, your records stay clean, and compliance isn’t a guessing game.

Your employees deserve more than a “close enough” benefits deduction. If your payroll system leaves you second-guessing the math, PayLane can fix it. Taylored Lane makes sure your benefits math is clean, compliant, and crystal clear.