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Administrator Guide
Last Updated: 2023-06-23
Concept: Default Allocation of Employer-Paid Expenses

Concept: Default Allocation of Employer-Paid Expenses

Overview

Workday automatically allocates the costs of employer-paid expenses, based on the allocation of the earnings that constitute an employee's gross pay.
Workday uses the formula:
(Earnings Allocated to a Cost Center / Sum of All Earnings)
 x
Expense Amount
. To adjust for rounding, it calculates the last expense distribution using the formula:
Expense Amount - Sum of All Prior Expense Distributions
=
Final Expense Distribution Amount
. The last distributed instance of an expense can be based on any of the employee's regular earnings. There's no way to select which distributed instance receives the rounding adjustment.
Example
John receives base pay of 1000 and commission of 1000. Using an earning override, Workday splits his base pay among 3 cost centers: CC 1, CC 2, and CC 3. No overrides exist for commission, so Workday assigns it to CC 1, the default cost center for his organization.
Workday allocates his base pay and commission as follows:
Default Cost Center
Earning
Earning Level Overrides and Splits
Amount Distributed to Each Cost Center
CC 1
Base Pay = 1000
  • 30% to CC 1
  • 30% to CC 2
  • 40% to CC 3
  • 300 to CC 1
  • 300 to CC 2
  • 400 to CC 3
CC 1
Commission = 1000
No override
1000 to CC 1
John also has an employer-paid insurance expense of 80. To distribute the expense, Workday applies the formulas to come up with this distribution:
Cost Center
Earnings Allocated To Cost Center
Sum of All Earnings
Expense Amount
Calculation Result
CC 1
300 Base Pay + 1000 Commission = 1300
2000
80
(1300 ∕ 2000) x 80 = 52
CC 2
300 Base Pay
2000
80
(300 ∕ 2000) x 80 = 12
CC 3
400 Base Pay
2000
80
80 - (52 + 12) = 16

Exclude Negative Result Lines

When calculating employer-paid expense, Workday prorates the amounts based on the allocation of earnings. When the gross value of these earnings gets close to zero due to negative payroll result lines, the amounts allocated to the employer-paid expense might inflate but the calculation remains the same.
To avoid the inflated numbers, Workday enables you to exclude these negative result lines for your employer-paid expense default costing. You can use the
Employer Paid Expense Default Costing - Exclude Negative Result Lines
option on the
Edit Tenant Setup – Payroll
 task.
Example
When gathering earning Payroll Result Lines values to prorate across employer expenses, you can exclude negative result lines. Workday uses this formula
(Earnings Allocated to a Cost Center / Sum of All Earnings)
 x
Expense Amount
.
In the example, there are 4 earning lines allocated to cost centers. We calculate the distribution based on the Workday formula and use 1200 as the employer-paid expense amount.
Default Cost Center
Actual Payroll Gross
Distribution Percent
Employer-Paid Expense Amount
CC 1
-9000
Excluded
CC 2
7500
7500/10000 = 75%
1200 x 75% = 900
CC3
2500
2500/10000 = 25%
1200 x 25% = 300
CC3
-6000
Excluded
Total
10,000
100%
1200