3501 PR.01 Payroll Costing

Revision Date: 
August 8, 2017

Contents

1.     Overview

2.     Timing

3.     Types of Payroll Costs

4.     Earning Hierarchy

5.     Costing Hierarchy for Employer-Paid Expenses and Employee-Paid Deductions

6.     Allocation Basis

7.     Assigning Costing Allocations

8.     Payroll Costing Validations

9.     Costing Allocation Maintenance

10.    Payroll Obligations

Payroll Costing is the process in Workday that assigns charging instructions to earnings, deductions, expenses, and other payroll-related journals. 

The Run Pay Accounting task is an integral part of the overall payroll process.  During payroll calculation, costing allocations are used to distribute payroll costs to the appropriate charging instructions.

Workday automatically allocates certain payroll journals.  Others can be reallocated.  The chart below describes the different types of payroll costs and the associated allocation expectation.

Type of Payroll Costs

Default Allocation

Are allocations managed by the Department?

Employee earnings belonging to the Adds to Gross or Adds to Net pay component group

Allocated to the cost centers, projects, grants, and other organization types associated with the worker’s supervisory organization.

Yes - The Cost Center Payroll Costing Specialist manages earnings through the Assign Costing Allocation task.

Employer-paid expenses

These are taxes and benefits that add to labor costs, but not to a worker’s gross or net pay. They are identified as additional pay components or in additional pay component groups for the run category.

Charged to central costing allocations.

No - Only central users can adjust the costing allocation for employer-paid expenses.

Other deductions and net pay

Charged to central costing allocations.

Net pay is charged to the cost center of the worker; other worktags are central accounts.

No - Only central users can adjust the costing allocation for employer-paid expenses.

Fringe benefit expenses

Based on the distribution of the worker’s gross pay earnings.

No – Fringe is adjusted automatically when earnings are adjusted.

Fringe benefit recovery

Charged to central costing allocations.

No – Fringe is adjusted automatically when earnings are adjusted.

Within Workday, there is a payroll costing hierarchy.  Costing for payroll can exist at several levels of the hierarchy.  At Yale, the following levels are in use:  Payroll Input, Worker Position Earning, Worker Position, Position Restriction, Position’s Supervisory Organization, Posting Rules Resulting Worktags (i.e., ledger account, spend category).

The levels of the hierarchy work in order, with Payroll Input overriding all levels below it, etc.  A cost center is inherited from the Position’s Supervisory Organization; however, a cost center is not the full set of costing worktags needed for payroll.

If more than one set of costing allocation applies to an employee’s earnings, Workday applies the instructions in this sequence.

  1. Worktag overrides entered through payroll input, on demand payments, and manual payments.
    • Payroll Input includes:  Kronos, Timesheet X and GSPS
  2. Worktag values entered through compensation (one-time payments and period activity payments).
  3. Worker position earning (specific earning for a worker).
  4. Worker’s position (all earnings for a worker’s position).
  5. Position restriction.
  6. Position’s supervisory organization (Default Cost Center).
  7. Posting Rules Resulting Worktags: Ledger Account and Spend Category only.

Hierarchy

Information

Payroll Input

COA values are provided by external systems:  Kronos, GSPS or entered in the Payroll unit.

Payroll input overrides any other costing allocation within the hierarchy.

Covers students paid hourly, service and maintenance staff and graduate students.

One Time Payments and Period Activity Pay

COA values are provided when the request for payment is entered.

Input overrides any other costing allocation within the hierarchy.

Worker Position Earning

(Worker + Position + Earning)

Costing allocations assigned by the Cost Center Payroll Costing Specialist. 

Provides exact COA segment allocations for a specific pay component paid to the worker for the selected position.

Covers staff and faculty.

Worker Position

(Worker + Position)

Costing allocations assigned by the Cost Center Payroll Costing Specialist. 

Provides exact COA segment allocations for the worker’s position.  Costing allocations are assigned to all pay components for the worker unless specifically identified with a unique costing allocation at the pay component level (worker + position + earning).

Covers staff and faculty.

Position Restriction

Costing allocations assigned by the Cost Center Payroll Costing Specialist. 

Current and future incumbent inherits the position restriction costing allocation.

Position restriction will also show in My Worktags.

Covers position management.

Default Cost Center

(Default Organizational Assignment)

Inherited from the Supervisory Organization at the time of Hire or Change Organizational Assignment

Costing for Employer-Paid Expenses and Employee-Paid Deductions is specific and managed centrally.  These pay components should not be charged to the Worker’s costing overrides. 

To account for changes in costing allocations throughout a pay period, mid-period costing is in use.  Mid-period costing provides the ability to apply a costing allocation to any date within the pay period (for example, when a Grant ends on 1/15/17 and the pay period end date is 1/31/17). 

When costing allocations change mid-period, Workday prorates costs for:

  • Earnings based on the proration method (calendar days or days worked) of the earning.
  • Earnings based on calendar days when a proration method isn’t specified for the earning or the earning is not setup to cause proration.
  • Deductions for employer-paid expenses based on calendar days.

When Payroll passes costs to Workday Financials it also passes the end date of the costing allocation as the Budget Date.  Changes to a worker’s default organization assignments don’t cause costed earnings proration.  Forward accruals use the costing allocations in effect on the period end date.

When costs are allocated across multiple organizations, and rounding is required, Workday calculates the last distribution, using the formula: Total Calculated Value of Pay Component - Sum of All Instances Prior to Final Instance =Final Distribution Amount.  When payroll results that include earnings with associated override values (i.e., a specific costing allocation) are reversed, Workday uses the allocation instructions associated with the original results to process the reversal.

The Assign Costing Allocation task in Workday is used to manage Position Restriction, Worker Position and Worker Position Earning Level costing allocations.  The Cost Center Payroll Costing Specialist performs this task.  This task is completed routinely to maintain costing allocations and is performed as part of HCM business processes:  Create Job Req, Hire, One Time Payment, Period Activity Pay, Request Leave of Absence (faculty only). 

Position Restrictions

In HCM position management, a position restriction can be applied to ensure certain criteria is met during the hiring process.  In addition to this information, there is an area to provide a payroll costing allocation that is specific to the position and carries forward with that position no matter the incumbent.  A position restriction costing allocation provides a default costing allocation when no other costing allocation exists for the worker.  Position restriction costing is managed by the Cost Center Payroll Costing Specialist.  The Grant worktag cannot be used in a Position Restriction costing allocation.

Worker Plus Position

The Worker Position Level of the costing allocation hierarchy applies all costing allocation instructions only to the selected position and for all earnings, unless specifically allocated at the Worker Position Earning level.

Worker Plus Position Plus Earning

The Worker Position Earning Level of the costing allocation hierarchy applies all costing allocation instructions only to the selected earning for the selected position. 

Costing Allocation Information

  • Costing allocation start and end dates cannot overlap past or future instructions.
  • Workday displays new or copied allocations first. 
  • Attachments are not copied.
  • The sum of all costing allocations entered for a single time-period must equal 100%.
  • Costing allocations related to payrolls that have already processed should not be changed.

Ledger Account and Spend Category

The ledger accounts and spend categories used for payroll transactions are charged based on a set of Account Posting Rules.  Account Posting Rules help to promote accurate distribution and reporting of expenses. Ledger accounts and spend categories are not entered when setting up the costing allocation.

Special Considerations – Leave of Absence

When a faculty member is approved for an Academic Leave of Absence, the Cost Center Payroll Costing Specialist should adjust the payroll costing allocation for Academic Leave by using the Additional Worktag, Accounting Treatment > FacLOA.  This worktag will drive the ledger account and remove the fringe assessment for the allocation period.  Note: This worktag should not be used on an allocation that includes a Grant worktag even if the Grant is charged during the leave.

Special Considerations – Pension Cap

Faculty in the School of Medicine whose salary exceeds the IRS pension cap (not to be confused with the sponsor imposed rate cap for grants and contracts), should use the addition worktag, Accounting Treatment > PensionCap on the appropriate charging instruction lines.  Use of the additional worktag will drive the ledger account and will apply the nominal 2% fringe assessment to the salary that exceeds the pension cap amount. The PensionCap worktag must not be used by non-YSM departments.

Special Considerations - VA Federal IPAs

IPAs, identified through Yale Designated YD000377, need to be assessed fringe at the Grants and Contracts rate.  For fringe to be applied correctly, all workers that have costing allocations that include YD000377 require an Additional Worktag.  The Additional Worktag of Accounting Treatment > VAFedIPA, is entered and managed by the Cost Center Payroll Costing Specialist.

8. Payroll Costing Validations

Workday Standard and Custom Validations

Workday validates new costing allocations and validates existing allocations when updated.  The following custom validations help to ensure correct entry of payroll costing allocations.  Critical warnings prevent the costing allocation from updating.

Severity

Validations

Critical

Position Restriction Costing Allocation cannot be charged to a Grant (payroll costing)

Critical

Costing Allocation Interval date ranges must not overlap - the date range

submitted conflicts with another proposed Costing Allocation Interval

Critical

Payroll Costing Allocations cannot be charged to Program PG99999 -

Transaction Suspense (payroll costing)

Critical

Inactive Gift cannot be charged.

Critical

Inactive Grant cannot be charged.

Critical

Inactive Program cannot be charged.

Critical

Inactive Project cannot be charged.

Critical

Clinical Bonus/YSM FAC Incntv cannot be charged to a Grant.

Critical

Grant (Award Line) is Closed or On Hold.

Critical

Gift, Grant or Yale Designated must be entered.

Critical

Gift and Yale Designated cannot be on the same line.

Critical

Budget Only COA segments cannot be used.

Critical

Payroll Costing Allocations cannot be charged to an Income Fund.

Critical

Payroll Costing Allocations cannot be charged to Capital Projects.

Critical

Payroll Costing Allocations cannot be charged to funds used only by the

Controller’s office.

Critical

Payroll cannot be allocated to a Grant that has a Subaward Spend Restriction.

Critical

Payroll Costing Allocations cannot be charged to Student Loans.

Critical

Costing Allocation Dates must be between the Grant (Award Line) start and end date.

Critical

When a Grant is charged and either a Gift or Yale Designated is entered, the Fund

cannot be sponsored funds FD02, FD28 or FD29.

Critical

When a Grant is charged and either a Gift or Yale Designated is entered, the Fund must

be sponsored fund FD02, FD28 or FD29.

Warning

Assignee is required for Yale School of Medicine transactions going to accounts under

the control of faculty

Warning

Percent Allocation cannot have more than two decimal places.

Warning

When charging this earning to a grant, prior approval must be obtained and be on file.

Warning Payroll costing allocations that include grants should have an end date.

System-Generated Transaction Suspense

The program, PG99999, is used during the payroll accounting process when no other costing hierarchy is present for the worker.  It is necessary to have full charging instructions during the payroll process to complete the process and produce a paycheck.  All salary costs that have been charged to this program must be moved by the Cost Center Payroll Accounting Adjustment Specialist to the appropriate account. 

Grant Start and End Date Validation

In addition to prospective costing allocation entries that validate on grant status and certain grant dates (see above), the Workday payroll process will validate on the current grant start and end dates (i.e., the grant start and end dates as of the system date).  The Workday process ensures that the budget date of the payroll is between the Grant (Award Line) From Date and Grant (Award Line) To Date.  If the payroll budget date falls outside of the date range, the worker’s Position Restriction or a central default account [i.e., PG99999] will be used.  Costing Allocations should be maintained by the Cost Center Payroll Costing Specialist whenever the grant award line dates change and impact the validity of current and future costing allocation start and end dates.  Reliance should not be made on the system to default the charging. 

Costing allocations for Workers must be continuously monitored to ensure proper charging of salary expenses.  The following reports are available in Workday for monitoring:

  • Find Workers Costing Allocations by Home Cost Center - Yale
  • Find Workers Costing Allocations by Charging Cost Center - Yale
  • Find Position Restrictions Costing Allocations – Yale

10. Payroll Obligations

Payroll obligations are covered in Procedure 3501 PR.03.  There are specific costing allocation maintenance tasks and HCM events that impact payroll obligations.  Refer to the procedure for an overview of managing the payroll costing hierarchy for all active positions in the unit.

Roles and Responsibilities

Cost Center Payroll Costing Specialist - responsible for keeping costing allocations for Earnings current; costing allocation are managed through the Assign Costing Allocation task.  In addition, the Assign Costing Allocation task is a sub-process of certain HCM events.  The Cost Center Payroll Costing Specialist also manages the task for those events.

Cost Center Payroll Accounting Adjustment Specialist - responsible for clearing any salary expenses that charged to PG99999 and other worktags if charged incorrectly. 

Payroll Costing Manager – in Business Solutions Operations, is responsible for maintaining costing allocations for Employer-Paid Expenses and Employee-Paid Deductions as well as certain Earnings charged to central accounts.  The Payroll Costing Manager corrects costing allocation errors during payroll processing and communicates the need to correct errors to the Cost Center Payroll Costing Specialist, as needed. 

Workday Training References

Payroll costing allocation references and training are available on the [email protected] Training website:  http://workday.training.yale.edu/workday-financials.