Skip to main content
Documentation
Documentation
Administrator Guide
Last Updated: 2026-05-15
Steps: Set Up Labor Costing

Steps: Set Up Labor Costing

If you use worktags, configure them before you set up labor costing. Use the
Maintain Worktag Usage
 report to review and verify your worktags. Workday represents organization types and locations as worktag types. Examples:
  • Business units.
  • Cost centers.
  • Custom organizations.
  • Funds.
  • Gifts.
  • Grants.
  • Locations.
  • Programs.
  • Projects.
  • Regions.
Use these steps to allocate earnings and expenses to your defined organizations and locations (worktags).
  1. Edit Business Processes and configure
    Assign Costing Allocation
    .
    Use
    Assign Costing Allocation
     on its own or as a subprocess of the
    Hire
     or
    Termination
     business processes.
  4. (Optional) Configure
    Assign Costing Allocation
     to display estimated annual compensation.
    See Embed Related Worklets in Business Processes.
    As you complete the task, consider:
    Field
    Description
    Name
    Select
    Estimated Annual Compensation
    .
    Field
    Select
    Position for Assign Costing Allocation
    .
  6. Enable worktags that you can use in costing instructions.
  7. (Optional) Access the
    Maintain Payroll Accounting Options
     task:
    1. On the
      Costing
       tab, select the
      Enable Mid Period Costing
       checkbox.
      Workday prorates costing allocation by the proration type on the pay component. Costing always prorate regardless of pay component proration.
    2. Select the
      Require Position
       checkbox.
      Workday requires you to select
      Position
       for the
      Assign Costing Allocation
       task or web service, so you can allocate costs for positions on leave.
      This requirement can prevent you from completing the
      Leave of Absence
       business process for worker leaves. To work around this restriction, add a step condition logic to the
      Leave of Absence
       business process to skip costing for worker leaves.
    3. On the
      General
       tab, select the
      Intercompany Accounting - Enable
       checkbox.
      When enabled, you can charge payroll expenses between multiple companies within an organization. See: Setup Considerations: Payroll Intercompany Accounting.
    4. Select
      Allocate New Pay Liability Based on Earning Proration
       to enable net pay liability allocation to create multiple actuals journal lines consistent with the distribution of the earnings paid to the worker.
      Note:
       You cannot enable this feature if the
      Intercompany Accounting - Enable
       checkbox is selected.
    5. Select
      Allocate Net Pay Liability - Exclude Negative Result Lines
       to exclude negative earnings when calculating the earnings-based proration for net pay liability allocation, preventing inflated distributions or miscalculations.
      Note:
       You cannot enable this feature if you have not enabled
      Allocate Net Pay Liability
      .
    6. On the
      Costing
       tab, select the
      Display Costing Allocation Event Number
       checkbox.
      When enabled,Workday assigns an ID number to completed costing allocation events and displays it in various reports. In addition, Workday retroactively assigns ID numbers to past costing allocation events with a completed status. Thisensures more efficient tracking and auditing. It also supports linking these events with their associated Pay Accounting Reallocation journal entries.
    7. For Payroll for the U.S., if your organization uses salary over the cap, select the checkboxes to enable the feature in the
      Grants/Awards
       and
      Commitments
       sections.
  8. You can create salary caps only when you enable the salary over the cap feature for payroll accounting on the
    Edit Tenant Set Up - Payroll
     task.
  9. (Optional) Use these options to review a worker's default costing allocations:
    • The
      Organization Assignments
       tab on the
      View Supervisory Organization
       report (
      Manage Supervisory Organization
       domain in the Organization Assignments functional area). This report displays default cost allocations that workers inherit from the supervisory organization.
    • The
      Pay
       option on a worker's profile. Select
      Costing Allocations
      . The default costing allocations displayed on the worker's profile take precedence over allocations inherited from the supervisory organization.
  10. (Optional) Override default costing instructions by assigning cost allocations to specific:
Workday allocates payroll costs according to the costing rules you've configured.
For Payroll for Canada and Payroll for the U.S., when you use multiple jobs functionality, journal entry lines include a position worktag and costing worktags. For worker-based pay components, Workday includes the worktag for the processing position, unless you select a position when entering payroll input.
Review the distributions on these reports:
  • Pay Calculation Results for Worker
     (
    Actuals
     tab of
    View Payroll Result
    )
  • Payroll Accounting by Period/Pay Group
  • Payroll Accounting by Company/Period