Concept: Allocate Net Pay Liability Based on Earning Proration
The Allocate Net Pay Liability Based on Earning Proration feature allows you to generate multiple actuals journal lines for the net pay liability (credit) that align with the distribution of earnings paid to the worker.
This provides the ability to better track and manage the liability associated with payroll net pay and eliminates the need to process post-payroll journal entries to reclassify accounting.
The Allocate Net Pay Liability Based on Earning Proration feature supports:
- Intercompany Accounting
- Journal Summarization
- Multi-position Workers
- Multiple Currency on Single Company Results
- Retroactive Pay Results
- Worktag Balancing
Actuals Journals
With
Allocate Net Pay Liability Based on Earning Proration
enabled, you can create multiple journal lines for net pay based on the distribution of earnings. If you use Worktag Balancing, the net pay, earnings, employee, and employer deductions journal lines (debits and credits) are subject to balancing. The system uses the primary worktag dimension from the Worktag Balancing rule and the optional balancing dimension from the worker's Default Organizational Assignments to create intercompany and/or interworktag payables and receivables journal lines.
Any small rounding differences that occur when calculating net pay journal lines will be added to the largest net pay amount. If there are multiple net pay journal lines that are the same and the largest, the difference will be added to the worktag set based on ascending order.
Workday enters a journal line per prorated earning when you process:
- Payments with earnings proration.
- Manual payments with earnings proration, including negative manual payments.
If there are Adds to Gross (ATG) and Net Pay Only (NPO) earnings on both regular or manual payments, Workday only prorates the net pay journal lines associated with the ATG pay components. NPO pay components display on a separate journal line.
- Example
- An employee has a gross pay of $1000, their proration of earnings is a 30/70 split, and they have a $100 Employee Deduction. For simplicity, in this example no other deductions apply this pay result.With this set up, their payroll actuals looks like:Pay ComponentDebitCreditWorktagsEarning- Base Pay300Fund 1, Cost Center 1Earning- Base Pay700Fund 2, Cost Center 2Employee Deduction100Fund 0, Cost Center 0Net Pay900WithAllocate Net Pay Liability Based on Earning Prorationenabled, their payroll actuals would separate the net pay into two separate lines, resulting in payroll actuals that look like:Pay ComponentDebitCreditWorktagsEarning - Base Pay300Fund 1, Cost Center 1Earning - Base Pay700Fund 2, Cost Center 2Employee Deduction100Fund 0, Cost Center 0Net Pay270Fund 1, Cost Center 1Net Pay630Fund 2, Cost Center 2
Payments Journals
When Allocate Net Pay Liability Based on Earnings Proration is enabled, multiple net pay liability lines (credits) are created based on the distribution of earnings on the actuals journal. The net pay liability lines (debits) on the Payroll Payment Journals follow the splits from the actuals journals to relieve the liability accounts.
The Payroll Payments Journals will continue to follow the configuration of your cash balancing rule. Workday will still generate any necessary intercompany and/or interworktag payable and receivable journal lines to balance at the bank account level.
Note:
Ensure you test all the way through settling payroll and intercompany settlements. You can expect an increase in the time to complete or cancel settlements, especially if your company uses intercompany accounting or worktag balancing. Exclude Negative Results Lines
With
Allocate Net Pay Liability - Exclude Negative Result Lines
enabled, you allow the exclusion of negative earning result lines from the proration calculation and you can eliminate or correct improper prorated distributions.When you have negative earning lines that decrease the payroll gross, the earnings-based distribution percentages are impacted and this could cause the resulting net pay split amounts to be artificially inflated.
If all earnings on the pay result are negative and excluded, the system uses the worktags from the worker's Default Organizational Assignments to create the journal lines.
- Example
- An employee has a gross pay of $200, including some negative earnings, and they have a $100 Employee Deduction. For simplicity, in this example no other deductions apply this pay result.With this set up, their payroll actuals looks like:Pay ComponentDebitCreditWorktagsEarning - Base Pay300Fund 1, Cost Center 1Earning - Base Pay700Fund 2, Cost Center 2Earning - Bonus-800Fund 3, Cost Center 3Employee Deduction100Fund 0, Cost Center 0Net Pay100Payroll actuals withoutExclude Negative Resultswould produce a costing proration of:EarningAmountWorktagsMathProrationBase Pay300Fund 1, Cost Center 1(300/200)*100= 1.5150%Base Pay700Fund 2, Cost Center 2(700/200)*100= 3.5350%Bonus-800Fund 3, Cost Center 3(-800/200)*100= -4-400%Total200Payroll actuals withoutExclude Negative Resultsenabled would produce:Pay ComponentDebitCreditWorktagsEarning - Base Pay300Fund 1, Cost Center 1Earning - Base Pay700Fund 2, Cost Center 3Earning - Bonus-800Fund 3, Cost Center 3Employee Deduction100Fund 0, Cost Center 0Net Pay150Fund 1, Cost Center 1Net Pay350Fund 2, Cost Center 2Net Pay-400Fund 3, Cost Center 3Payroll actuals withExclude Negative Resultswould produce a costing proration of:EarningAmountWorktagsMathProrationBase Pay300Fund 1, Cost Center 1(300/1000)*100= 0.330%Base Pay700Fund 2, Cost Center 2(700/1000)*100= 0.770%Total1000Payroll Actuals withExclude Negative Resultsenabled would produce:Pay ComponentDebitCreditWorktagsEarning - Base Pay300Fund 1, Cost Center 1Earning - Base Pay700Fund 2, Cost Center 2Earning - Bonus-800Fund 3, Cost Center 3Employee Deduction100Fund 0, Cost Center 0Net Pay30Fund 1, Cost Center 1Net Pay80Fund 2, Cost Center 2