If you offer insurance or other benefits through providers outside of Gusto, you can set up pre-tax payroll deductions for your team. This lets you collect employee contributions through payroll deductions, and we'll also include the reported employee and company contributions on year-end tax forms.
Where the Deducted Money Goes
All benefit deductions remain in your company bank account so you can pay your company's insurance premiums directly to your carriers. If your company has multiple bank accounts set up, the money remains in the account you used to process that specific payroll.
If Gusto is the broker of your health insurance or you've set up a Guideline 401(k) through Gusto, you do not need to take any action to manage deductions—they're automatically integrated with payroll.
Set Up A Benefit Deduction
Follow these steps to set up a new benefit deduction for your company. First you'll enter the amount and frequency, then you'll choose which employees you want to be deducted.
Go to Settings → Admin → Payments & Finances → Payroll.
Click the Drop Down Menu by Gusto Onboarding Form.
Select Manage Company Benefits, and click Open.
Click Add Benefit.
Add the benefit name in the "Benefit name" field. This is how it will appear on the employee’s paystub.
Select the benefit under "Benefit type."
Toggle the "Coverage Status" for eligible employees.
Add "Company contribution" and "Employee deduction."
Click Submit.
On the next regular payroll you run, the deduction will show up on each enrolled employee's paystub as its own line item under "Employee Earnings."
Add An Employee To An Existing Deduction
Go to Settings → Admin → Payments & Finances → Payroll.
Click the Drop Down Menu by Gusto Onboarding Form.
Select Manage Company Benefits, and click Open.
Click ⫶ Edit Employees next to the relevant benefit type.
Click Add Employees to Benefit.
Enter the employee deduction. This is the amount that will be deducted from the employee each pay period.
If different employees have different deductions, enter a default amount for now. You can customize each person's deductions in step 10.
Enter the company contribution per pay period. We'll keep track of this amount for your records and year-end taxes.
If different employees have different company contributions, enter a default amount for now. You can customize each person's contributions in step 10.
Click Submit.
If you need to edit any employees' individual deductions or contributions, find the name of the employee and click Edit benefit. Enter their personal deduction and contribution amounts and click Submit.
On the next regular payroll you run, the deduction will show up on the employee's paystub as its own line item under "Employee Earnings."
How Gusto Calculates Deductions
Gusto calculates deductions automatically but if you want to understand the behind-the-scenes math, here's how it works:
The premium you enter is first annualized, to find the total amount that the employee should be deducted for per year.
The annualized amount is divided by the number of pay dates your company has per year. This is based on your normal pay schedule:
Weekly: 52 pay dates
Bi-weekly: 26 pay dates
Semi-monthly: 24 pay dates
Monthly: 12 pay dates
The resulting number is the amount that the employee will be deducted per regular paycheck.
Example: Say your team is paid bi-weekly, and an employee enrolled in medical coverage with a premium of $250 and an employee portion of $125 a month. After you enter this amount and frequency into Gusto, here's how the deduction per pay period is calculated:
$125 × 12 months = $1,500 due per year.
$1,500 ÷ 26 paycheck dates = $57.69 per paycheck.
The employee will be deducted $57.69 pre-tax from every regular paycheck.
Change A Benefit Deduction or Company Contribution
Edit an Individual Employee's Deduction or Company Contribution
If your employees' benefit amounts have changed, follow these steps to edit their deductions or company contributions.
Go to Settings → Admin → Payments & Finances → Payroll.
Click the Drop Down Menu by Gusto Onboarding Form.
Select Manage Company Benefits, and click Open.
Click ⫶ Edit Employees next to the relevant benefit type.
Click ⫶ Edit Employee Benefit next to the relevant Employee.
Modify the benefit details for this employee.
Click Submit.
The next time you run payroll, we'll deduct the employee's benefit amount from their pay and leave the funds in your company's bank account. We'll also record the employee and company contributions on the paystubs. You can then pay all of the benefit contributions to your insurance carrier.
Change The Name of A Benefits Deduction
If you'd like to update the name of a benefit or the carrier, here's how to edit these details:
Go to Settings → Admin → Payments & Finances → Payroll.
Click the Drop Down Menu by Gusto Onboarding Form.
Select Manage Company Benefits, and click Open.
Click ⫶ Edit Benefit next to the relevant benefit type.
Make your update to the benefit name or carrier.
📌 Note: Updating a benefit's name will retroactively adjust previous paystubs.
Click Save & Continue.
Remove Benefit Deductions
Remove A Benefit Deduction For Just One Employee
If an employee is no longer enrolled in a benefit you offer, follow these steps to disable the benefit deductions.
This disables deductions for just the selected employee. Other enrolled employees are not affected, and you can re-enroll the employee if needed.
Go to Settings → Admin → Payments & Finances → Payroll.
Click the Drop Down Menu by Gusto Onboarding Form.
Select Manage Company Benefits, and click Open.
Click ⫶ Edit Employees next to the relevant benefit type.
You have two options to remove the deduction:
To unenroll this employee and allow easy re-enrollment later:
Under "Currently Active?" select No, stop making deductions and contributions for now.
The benefit remains listed as "inactive" in the employee's profile under their Benefits tab.
To fully remove the benefit from their profile:
Click the red text that says Remove this benefit.
The benefit will be removed entirely from their Benefits tab. You can still re-add the employee later if needed.
✅ On your next payroll, no deduction will be applied for this employee.
Remove A Benefit Deduction For Your Whole Team
👉 Heads up: At this time, it is not possible to delete a Company Benefit as a whole. You will need to remove all employees from the benefit using the steps above.
🛟 Need more help?
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