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Administrator Guide
Last Updated: 2024-06-14
Concept: Forward Accruals Costing for Employer-Paid Statutory Taxes

Concept: Forward Accruals Costing for Employer-Paid Statutory Taxes

When a payroll result has a sum of earnings contributing to forward accruals that's larger than the total gross, the calculations used to determine the forward accrued employer-paid expense (ER) amounts can over allocate the accrual value.
Workday uses the formula: ER Amount * (Days to Accrue / Days in Basis) * (Earnings Forward Accrued / Gross). When (Earnings Forward Accrued / Gross) > 1, then over allocation can occur. The over allocation happens when the payroll result includes a relatively large negative value for an earning excluded from forward accrual.
Example
John has default organizational assignments set as CC0, Fund0. The initial total gross amount is $10,000. When John is on sabbatical leave that reduces his pay, and results in negative earnings of $6000. The total gross amount now is $10,000.00 - $6,000.00 = $4,000.00.
Employer-Paid Statutory Tax: OASDI (ER 6.2%) calculated on the total gross amount of $4,000 = $248.00.
Earnings contributing to the gross amount of $4,000:
  • Base Pay: $8,000.00 (Cost to CC1, Fund1)
  • Additional Pay: $2,000.00 (Cost to CC2, Fund2)
  • Sabbatical Reduction: - $6,000.00 (Cost to CC3, Fund3)
While calculating forward accruals for inflated employer-paid statutory taxes, Workday provides flexibility to costing with the
Disable Forward Accrual Costing to Worker Defaults when Employer Paid Statutory Taxes Over Allocate
 check box in the
Payroll Costing
 section on the
Edit Tenant Setup - Payroll
 task.
When you select the check box:
Workday costs all employer-paid statutory taxes based upon the earning proration.
Costing allocation and distribution of employer-paid statutory taxes across earnings:
  • Base Pay: $8,000.00 (Cost to CC1, Fund1) = 200%
  • Additional Pay: $2,000.00 (Cost to CC2, Fund2) = 50%
  • Sabbatical Pay: - $6,000.00 (Cost to CC3, Fund3) = -150%
Employer-paid OASDI of $248 applied across earnings:
  • OASDI-ER (Cost to CC1, Fund1) = 200% * 248.00 = $496.00
  • OASDI-ER (Cost to CC2, Fund2) = 50% * 248.00 = $124.00
  • OASDI-ER (Cost to CC3, Fund3) = -150% * 248.00 = - $372.00
  • Total OASDI-ER: $248.00
Forward accrual calculation (Days to Accrue = 5, Days in Basis = 20):
  • OASDI-ER (Cost to CC1, Fund1) = 496.00 * 0.25 = $124.00
  • OASDI-ER (Cost to CC2, Fund2) = 124.00 * 0.25 = $31.00
  • OASDI-ER (Cost to CC3, Fund3) = -372.00 * 0.25 = - $93.00
  • Total OASDI-ER Accrued: $62.00
Workday charges OASDI-ER of $124.00 to CC1, Fund1 resulting in over allocation when compared to the total forward accrual of $62.00.
When you don't select the check box:
Workday continues to cost all employer-paid statutory taxes 100% to worker defaults.
  • OASDI-ER (Cost to CC0, Fund0) = $248.00
  • Total OASDI-ER: $248.00