Setup Considerations: Payroll Proration

What It Is

In response to certain midperiod events, Workday divides a payroll period into subperiods with separate payroll calculations before and after the event. Example: Compensation changes.

For other midperiod events, Workday creates a subperiod to reflect accurately the portion of the pay period that you employed the worker. Example: Hire, termination.

When creating multiple pay periods, Workday can apply:

Pay component proration, resulting in 1 gross-to-net result that includes separate pay component values for each subperiod.

Gross-to-net proration, resulting in separate gross-to-net amounts for each subperiod.

Payroll for Ireland only supports pay component proration.

You can configure:

How Workday calculates pay component values for each subperiod.

In some cases, whether Workday uses gross-to-net or pay component proration.

Business Benefits

Prorating payroll calculations makes it easier to pay workers accurately, as it takes into account midperiod payroll changes when they occur.

Configuring how Workday calculates payroll amounts for each subperiod provides you with the flexibility to adapt your calculations for different scenarios.

Use Cases

You can prorate earnings and deductions to reflect midperiod:

AGIRC-ARCCO tax election changes (FRA).

Company or pay group transfers.

Compensation changes.

Changes to full-time equivalent or working time (FRA).

Hires or terminations.

Job changes.

Changes in scheduled weekly hours (AUS).

Changes in collective agreements (AUS).

Leaves of absence.

Changes to Military Spouse Residency Relief status (USA).

Primary work state changes (USA).

State changes for employees with tax allocations for multiple ongoing work jurisdictions (USA).

Questions to Consider

Questions	Considerations
Which earning and deduction amounts do you want to prorate?	For each earning and deduction, you can either: Define a method to prorate pay component amounts based on the calendar or working days in the subperiod. Process the pay component in full for each subperiod or once per pay period using worker eligibility criteria. When you don't select a proration method, Workday processes the pay component in full for each subperiod where the payment applies. When deciding whether to prorate a pay component, consider whether the inputs to the calculation already reflect the subperiod. For Payroll for Australia, you can also use related calculations and override calculations to set up proration rules that fit your requirements.
For prorated pay components, how do you want to calculate prorated amounts?	You can configure Workday to prorate calculation amounts based on: Calendar days. Working days in the period. Working days in the year, where you define the number of working days in the year. The calculation method that you configure for the related calculations (AUS).
Do you want separate payments for a leave of absence (LOA)?	By default, Workday uses gross-to-net proration to manage subperiods for LOAs entered in Workday Absence Management, creating a separate payment and payslip for each subperiod. You can configure Workday Payroll to use pay component proration for LOAs, which results in 1 payment and 1 payslip for the entire period. For Payroll for Australia, Workday recommends using Workday-delivered calculations to make payment when workers are on LOA. Payroll for Ireland: Only supports pay component proration. Doesn't prorate PRSI insurable weeks for workers on unpaid LOAs.
When do you want a midperiod compensation change to take effect?	Workday applies midperiod compensation changes entered through Workday Compensation to the entire payroll period where the change occurs. To reflect the compensation change midperiod, you can configure Workday Payroll to apply pay component proration to compensation changes.
Do your employees have multiple jobs (CAN, USA)?	When you configure multiple jobs, Workday manages pay group or company changes with pay component proration. When workers with multiple jobs change their pay group or company, Workday prorates position-based, not worker-based, pay components.
Are you using holiday hours as part of your calculation?	When creating a calculation that uses holiday hours from holiday calendars as inputs, Workday recommends using Workday-delivered instance value calculations. Example: Worker: Holiday Hours (from Holiday Calendar) for Worker during Sub-Period .
Which related calculations do you want to prorate?	Workday recommends: Prorating related calculations that return amounts for an entire pay period. Examples: Salary from Workday Compensation, scheduled hours. Not prorating related calculations that return amounts for the subperiod. Examples: Rates, hours worked for the subperiod, time off hours. To avoid double proration, Workday doesn't directly prorate a pay component amount when the earning has a pay component related calculation (PCRC) with a selected proration method. Workday applies this rule regardless of whether you use the PCRC in the calculation for the pay component. When you select a proration method for a related calculation that is different from the pay component proration method, Workday uses the pay component proration method.
Are you using FLSA to pay a bonus to workers on LOA (USA)?	Select the appropriate FLSA Bonus Allocation Across Coverage Dates rule when you configure the bonus earning. Workday then calculates bonus amounts for FLSA-eligible workers on LOA based on your configuration. See: Concept: FLSA Bonus Allocation.
Do you want to prorate midperiod changes for FTE/Working Time or ARRCO-AGIRC tax elections (FRA)?	You can configure a payroll proration override to prorate midperiod changes for FTE/Working Time or ARRCO-AGIRC tax elections. You can access the Maintain Payroll Proration Override task to opt into these features. Workday doesn't enable them by default. A retroactive change in FTE/Working Time or ARRCO-AGIRC tax elections doesn't trigger a retroactive calculation. When the retro is triggered by another event, FTE/Working Time or ARRCO-AGIRC tax election changes are included in the calculation.
How does Workday apply a referenced pay component when the primary pay component is subject to pay component proration?	When a primary pay component references another pay component (Example: Base Pay references Holiday Pay), you must select the Target Single Subperiod for a Prorated Pay Component check box on the Create Pay Component Group or the Create Pay Accumulation task. Selecting this check box sets the referenced pay component (Example: Holiday Pay) to target a single subperiod of the prorated primary pay component. To prevent any negative impacts on retro calculations, you must: Create a new pay component group or pay accumulation and enable Target Single Subperiod for a Prorated Pay Component. Create a new effective dated snapshot for your primary pay Component referencing the cloned pay component group or pay accumulation. If there are pay accumulations or pay component groups nested within, you must enable each level to target a subperiod accurately. When the reference pay component subperiod or period end date doesn't fall into a subperiod of the primary pay component, Workday applies the reference pay component to the first subperiod of the primary pay component. See Concept: Pay Component Proration Calculation For FLSA workers, Workday recommends that you enable Target Single Subperiod for a Prorated Pay Component feature only when the hours are prorated. It's recommended that pay inputs target the reduction to the correct FLSA subperiod. Otherwise, the reduction might go into the wrong subperiod and might impact your FLSA overtime calculation (over or under stated) because it lowers the wages for the wrong week.

Recommendations

Workday recommends enabling pay component proration for LOAs when gross-to-net proration results in negative gross pay.

Requirements

No impact.

Limitations

Limitation	Details
Not all midperiod changes cause proration.	Workday doesn't create multiple subperiods for midperiod changes in: Benefits. Pay rate types. Example: Hourly versus salaried. Worker positions. Changes in tax declaration (AUS). Changes in superannuation (AUS).
Work province changes (CAN).	When you make a midperiod change in both an employee's work province and company or pay group, Workday prorates the pay into multiple gross-to-net results. For all subperiods, however, Workday processes the province of employment effective at the end of the pay period.
Pay group changes.	The worker eligibility criteria used to process a pay component only once per pay period don't apply to subperiods created by pay group changes. Workday recommends making pay group changes before opening a pay period when you have pay components with None of the above selected as the proration method.
Midperiod terminations.	When a worker has a midperiod termination and there’s no pay through date, Workday generates only 1 subperiod, ending at the termination date. When a worker is terminated midperiod and there’s a pay through date within that same period and before the period end date, Workday generates 2 subperiods within the termination period. When the pay through date is on or after the full period end date, Workday generates a subperiod after the termination date. Example: A worker with monthly payroll is terminated on March 15. The worker has a pay through date of March 20. Workday creates 2 subperiods for the worker's March pay results: March 1 - 15 and March 16 - 20.
Midperiod transfers (IRL).	Workday prorates PRSI insurable weeks when you transfer workers midperiod. When you transfer workers from a monthly to a weekly pay frequency midperiod, the worker receives an additional insurable week, which you can adjust manually.

Tenant Setup

No impact.

Security

Domains	Considerations
Set Up: Payroll (Calculations - Payroll Specific) in the Core Payroll functional area.	Users with security enabled for this domain can select the proration method for an earning or deduction.
Set Up: Calculations - Generic in the Core Payroll functional area. Set Up: Time Off (Calculations - Generic) in the Time Off and Leave functional area.	Users with security enabled for either of these domains can select the proration method for a related calculation.
Set Up: Tenant Setup - Payroll in the System functional area.	Users with security enabled for this domain can enable pay component proration for LOAs.

Business Processes

Some business processes occurring midperiod result in multiple subperiods. See Reference: Midperiod Changes Causing Proration.

Reporting

Reports	Considerations
All Pay Results Blocking Tenant Proration Option Changes	Use to identify and complete in-progress payroll or retro payroll results before you enable pay component proration for LOA.
Maintain Payroll Proration Override	Enables you to manage payroll proration settings in your tenant. For a given country, you can: View which payroll proration categories support tenant override. Change the proration type for payroll proration categories that support an override. The user must be in one of these security groups : Payroll Administrator Payroll Auditor Payroll Partner
Proration Changes for Group of Workers	Use to identify workers with prorated pay results.

You can use the

Proration Changes for Workers for Period and Pay Run Group WS param

report data sources to create custom reports on payroll inputs.

Integrations

No impact.

Connections and Touchpoints

Features	Considerations
Absence Management	Workday creates multiple subperiods in response to midperiod LOAs. Pay component proration settings don't impact balance or accrual proration from Absence Management. When you create calculations with time off amounts as inputs, Workday recommends retrieving the time off amounts directly from ACRCs. Workday recommends that you don't reference other PCRCs in the earning or deduction definition. Example: When you reduce a worker's salary by amounts for paid time off, reference the time off ACRCs, instead of the PCRCs from time off earnings.
Compensation	Workday can create multiple subperiods in response to midperiod compensation changes. Pay component proration settings don't impact time-based proration for merit and bonus awards from Compensation.
FLSA calculations (USA)	Workday uses a pay component's proration method (calendar or work days) to prorate FLSA calculations. Workday prorates pay component amounts using this formula: (Number of days in FLSA period/Number of days in coverage period). When you select None of the above as the proration method, Workday divides the pay component amount by the number of FLSA periods in the coverage dates.
Labor costing	When you enable midperiod costing, Workday uses the proration method specified on earnings to prorate midperiod changes to cost allocations. Workday prorates midperiod costs for deductions based on calendar days, regardless of the deduction's proration method. Workday doesn't support the Prorate Using Annual Working Days proration method for midperiod costing. Workday uses calendar days instead.
On-demand payments	Workday manages the proration of on-demand payments differently depending on the payment type: Workday prorates on-demand replacement payments over all eligible subperiods, based on the selected proration method. Workday doesn't prorate on-demand additional payments. You must create separate payments or separate inputs for each subperiod.
Payroll input	Workday manages the payroll input for multiple subperiods depending on the input type: For one-time inputs, Workday processes the entire input in the subperiod that includes the payroll input End Date . For ongoing inputs, Workday resolves the pay component in each subperiod.
Retro pay calculations	The retro pay calculation applies the same proration method that you define for the pay component for payroll calculations. For LOAs, when you change the calculation method from gross-to-net to pay component proration, do so for all of their effective-dated definitions. This practice prevents unexpected results in the prior period that retro recalculates.
Payroll Processing Position (CAN, USA)	For workers with multiple jobs, Workday creates multiple subperiods, when either the: Primary position changes work states midperiod. Additional position is the processing position and changes work states midperiod.

Workday offers a Touchpoints Kit with resources to help you understand configuration relationships in your tenant. Learn more about the Workday Touchpoints Kit on Workday Community.

Other Impacts

When you don't select a proration method for an earning or deduction, you can configure whether Workday creates:

Multiple gross-to-net results for LOAs.

A single gross-to-net result for LOAs.

Example: You can enable pay component proration for LOAs on hour-based earnings where the related calculations directly return subperiod amounts.