Setup Considerations: Payroll Accounting

What It Is

Workday Payroll accounting enables you to:

Automatically generate accounting entries based on payroll results.

Allocate employee earnings and employer-paid expenses to organizations to determine labor costing.

You can use payroll accounting either:

Directly with Workday Financial Management.

Through an integration with a third-party financial system.

Business Benefits

Payroll accounting provides a streamlined process that automatically generates accounting entries after each payroll calculation, which helps ensure that your accounting data and financial statements are up to date. Automated processing for period-end accruals and currency conversions also reduce the amount of manual effort needed for managing accounting.

Payroll accounting also provides:

Custom balancing dimensions, providing flexibility in how you analyze and balance payroll journals.

Reports that make it easy to verify accounting results and quickly identify journal errors.

Security options, such as journal summarization and segmented security that enable you to ensure the confidentiality of payroll data.

Use Cases

Generate accounting journals based on payroll results.

Configure alternative costing rules for salary caps. Example: You can split a professor's pay among different cost centers and funds.

Make accounting adjustments to your payroll journal lines. Example: You can split a worker's base pay to a different cost center after posting your journal lines.

Use intercompany accounting to manage costs within multiple companies across an organization.

Summarize journal lines and restrict access to employee-level details from payroll journals.

Track start and end dates for grants.

Validate payroll effort expenditures within the scope of a funding agreement and confirm that you're billing correctly.

Questions to Consider

Questions	Considerations
Which types of ledger accounts do you use on your balance sheet and income statements?	You can configure different ledger account types for balance sheets and income statements. Although Workday Payroll uses only asset, liability, and expense account types, Workday recommends that you set up all available account types as you can't modify your ledger setup once you generate accounting.
What company ledger accounts does your company have?	When creating account sets, you can create a dedicated account set for your company ledger accounts for payroll. You can create a parent (chart of account) account set that includes one or more child sets. Workday recommends that you create a parent account that you assign to the company with a child set. This enables you to: Swap out the child account if you need to revisit the chart of account. Attach multiple child account sets. You can't change an account set once you've attached it to a company. When defining ledger accounts, you can restrict them to a specific company or company hierarchy.
How do you want post payroll transaction journals in company ledger accounts?	Within each account set, you can create rules that direct where to post: Payroll commitments. Payroll deductions. Payroll earnings. Payroll expenses. Payroll forward accruals. Payroll net pay. You can also define default ledger accounts for these posting types to identify transactions that don't meet a posting rule. Workday posts anything not meeting a posting rule to a default account to the ledger. Workday generates accounting journals automatically for these posting types, and recommends that you specify a default ledger account for them: Intercompany payables. Intercompany receivables. Retained earnings. After you configure posting rules, you can change them, but you can't apply the changes retroactively to completed payroll periods. To modify account posting in prior periods, create manual journals.
What ledgers do you use?	You can create different types of ledgers, such as actuals, commitment, and obligation. You can only have 1 actuals ledger type per company. You can't change the ledger setup after generating accounting.
What are your fiscal and ledger schedules?	Regardless of whether you use Workday Financial Management, you must create: Fiscal schedules and posting intervals. Ledger years and periods. You can't change a fiscal schedule once you assign it to a company. You must open a ledger period to generate payroll accounting results. You can open ledger periods in advance of generating the results. You can configure forward accruals to manage when a payroll period extends beyond the closing of a financial period. Workday uses forward accruals to estimate payroll accrual and fringe based on payroll result proration settings.
Do you need to manage accounting across multiple related companies?	You can split a worker's costing allocation across multiple organizations by enabling intercompany accounting. When you configure intercompany accounting, you can: Cost a portion of a worker's pay to multiple companies. Budget payroll expenses across an entire organization. You can't disable intercompany accounting after you have completed payroll processing and created journals.
What detail do you want to see in journal lines?	By default, Workday displays the detail of each journal line, based on your worktag configurations. You can enable journal summarization for an in-progress payroll to ensure that confidential payroll data isn't included in financial journals. Reducing the quantity of payroll journal lines by summarizing them can also improve performance in reporting. Once you enable it, journal summarization isn't effective until the next pay cycle. Workday runs journal summarization automatically after you've completed your payroll and settlements. Workday recommends you summarize journal lines at least by cost centers to improve performance. When you enable journal summarization after generating payroll journals: You can't retroactively remove employee details from the generated journals. Only an implementer can disable it.
What accounting date do you want to use in journal lines for off-cycle payments?	By default, Workday uses the period end date as the accounting date in journal lines. For off-cycle payments, you can set the payment date as the accounting date in journal lines for the entire tenant. Payroll Payment Journals use the payment date as the accounting date by default. The accounting date determines which ledger period to post the journal lines to. If this date falls within an open ledger period, Workday posts the journal lines to this period. If the ledger period is closed, Workday posts the journal lines to the next open ledger period.
How do you track and balance operational transactions?	You can define keywords, called worktags, that you can assign to transactions that track information according to business purposes. You can then use worktags as a dimension to balance your operational transactions. Once you enable worktag balancing, you can't disable or change it. When you define a balancing worktag, Workday autobalances journal lines associated with the worktag.
How do you want to allocate payroll costs when determining labor costing?	You can create costing allocation rules to determine how Workday assigns payroll costs among different organizations and locations. When configuring how to cost different transactions, you can define condition rules based on various criteria, such as organization types or worktags. Workday provides default costing allocations based on a worker's supervisory organization. You can override default costing instructions by assigning cost allocations to specific: Workers. Restricted positions. Employee earnings. Employer-paid expenses. Employer-paid deductions. Fringe benefit recovery (CAN, FRA, UK, USA). When determining costing rules, you can configure the Assign Costing Allocation business process to: Set up approval routing for approval by other groups, such as HR administrators. Assign alternate costing rules for salary caps. Restrict a costing to a specific position or staffing event.
Who do you want to manage costing allocations?	When you have multiple administrators managing costing allocations, you can add custom validations to prevent or warn users from submitting costing allocations with invalid worktag combinations. Example: You can set a critical condition when an administrator tries to allocate worker costs to a region that doesn't match the cost center.

Recommendations

Use journal summarization to summarize payroll journals at least by cost center to ensure efficient reporting and improve performance. Summarized journals enhance security as they don't contain employee-level data.

Identify and troubleshoot journals with errors using the

Fix Operational Journals With Errors

task.

Verify the balances of default accounts, and make any ledger corrections after calculating payroll. If you don't define default accounts for specific payroll transaction types, you can still complete payroll, but you must correct any operational journals before the next calculation.

Review account posting rules for possible rule consolidations and to ensure you've prioritized the most common rules.

Add a default ledger account to prevent journals from going into error status.

Enable

Always Reverse Operational and Noncontrolling Interest Journals

on the

Edit Tenant Setup - Financials

task.

If you use

Smart Calculation

on the

Run Pay Calculation

task, consider running the

Run Pay Accounting

task to ensure that your accounting is up to date before running the

Run Pay Complete

task.

If running large jobs before the weekly maintenance window, consider if you have enough time to complete them. If they don't complete, you might cause irreparable issues.

Requirements

Set up and define the worktags that you want to configure in your costing allocations or worktag balancing.

Make the company a required data element when initiating intercompany transactions with other companies. This helps ensure that companies are within the same account set.

Limitations

You can't disable intercompany accounting after you complete payroll processing and have created journals.

After you enable primary worktag balancing, you can't disable or change it, but you can change or disable additional worktag balancing.

You might not be able to adjust a payroll result completed before enabling primary worktag balancing if the original result didn't contain the worktag balancing dimension.

Workday doesn't convert currency for arrears, commitments, fringe benefit actuals, obligations, and pay balances.

Workday only supports the USD currency while creating salary caps.

Payroll web services don't respect related worktag functionality.

Tenant Setup

On the

Maintain Payroll Accounting Options

task, you can:

Charge payroll expenses between multiple companies.

Configure start and end dates for grant costing within a processing pay period.

Create forward accruals and reversals for fringe benefit expenses.

Display details for commitment journals to review and update data.

Enable cost allocations for employee-paid deductions.

Enable labor costing proration when allocations change midperiod.

Enable salary over the cap for payroll accounting.

Exclude negative result lines to avoid inflated numbers on your payroll actual journal.

Set the payment date as the accounting date in journal lines for off-cycle payments.

Set the transaction budget date as the pay period payment date after processing on-cycle payments.

Use the primary position attributes when evaluating account posting rules.

Security

You can configure segmented security based on pay components to limit which pay components an initiator can access when creating payroll accounting adjustments.

To view the full list of security domains for payroll, access the

Domain Security Policies for Functional Area

report and select a Payroll functional area.

Domains	Considerations
Process: Period End in the Common Financial Management functional area.	Users can open the ledger period to generate payroll accounting results.
Process: Run Batch Payroll Accounting in the Core Payroll functional area.	Users can generate new accounting entries without recalculating payroll.
Process: Run Batch Calculations (Pay Calculation) in the Core Payroll functional area.	Users can run payroll and payroll accounting calculations.
These domains in the Core Payroll functional area: Reports: Pay Calculation Results (Results - Security based on Pay Component Security) Reports: Pay Calculation Results for Organization (Accounting Results) Reports: Pay Calculation Results for Pay Group (Accounting Results) Reports: Pay Calculation Results for Worker (Results)	Users can create and edit payroll accounting adjustments.
Set Up: Ledger and Book in the Common Financial Management functional area.	Users can define: Ledgers. Ledger account types. Ledger years and ledger periods.
Set Up: Payroll - Company Specific (Accounting) in the Core Payroll functional area.	Users can: Create account posting rules. Create account sets. Create fiscal schedules. Define which account sets, account posting rules, and fiscal schedules to use. Enable journal summarization.
Set Up: Payroll - Pay Group Specific in the Core Payroll functional area.	Users can define rules for forward accruals on period schedules.
Set Up: Tenant Setup - Payroll in the System functional area.	Users can set tenant-wide options for payroll accounting.

Business Processes

Business Processes	Considerations
Assign Costing Allocation	You can configure this business process to allocate costing for a worker. You can also add it as a subprocess on other business processes to ensure you assign costing. Example: You require costing allocation for the Add Additional Job business process.
Create Payroll Accounting Adjustments	You can use this business process to configure: Cost center corrections. Distribution percentages. Net zero changes to payroll accounting for cost allocations for 1 or more pay periods.

Reporting

Reports or Dashboards	Considerations
All Earnings and Employee Deductions Costing Allocations	View all cost allocations that you configure for earnings and employee-paid deductions.
All Employer Paid Expense Costing Allocations	View all cost allocations defined for employer-paid expenses.
All Fringe Benefit Recovery Costing Allocations	View all cost allocations defined for fringe benefit recovery.
Pay Calculation Results for Group of Workers Pay Calculation Results for Worker	Verify pay calculation results from the past year.
Payroll Accounting by Company/Period	Verify created or posted entries to each ledger account for a company, including debit, credit, and net amounts.
Payroll Accounting by Period/Pay Group	Verify line items in the accounting entries by specifying the periods and pay groups.
Payroll Accounting Transactions Preventing Period Closure	Identify open payroll accounting transactions for a ledger period.
View Account Posting Rule Set	View and update all account posting rule sets and update the rule sets.

Integrations

Web Services	Considerations
Assign Costing Allocation	Enables you to assign a large number of costing allocations.
Get Payroll Accounting Options	Enables you to retrieve payroll accounting configurations.
Get Worker Costing Allocations	Enables you to retrieve costing information from a worker or position restriction.
Put Account Posting Rule Set	Enables you to update or create new account posting rule sets.
Put Account Set	Enables you to create ledger accounts and organize them into accounts sets. You can also designate an account set as a chart of account.
Put Company Accounting Details	Enables you to add or update accounting details for an existing company.
Put Cost Center	Enables you to add or update information on cost centers.
Put Payroll Accounting Options	Enables you to add or update payroll accounting configurations.

Connections and Touchpoints

Features	Considerations
Financial Management	Regardless of whether you use Financial Management, you must configure and regularly maintain accounting configurations related to payroll transactions. Payroll Accounting shares these configurations with Financial Management: Account posting rules. Account sets. Company currency. Fiscal schedules. Journal summarization. Worktag balancing. When you use Financial Management in addition to Workday Payroll, you can also track start and end dates through Grant Management.
Human Capital Management	These types of changes to a worker's situation can impact costing allocations: Default organization assignments. Hire. Position change. Termination. Worker events. Workday can calculate new costing allocations based on these changes.
Grant Management	You need a separate Grants Management license to be able to create and use awards in Workday. If you have Grants Management with Payroll Accounting, you can: Create salary caps. Assign the salary cap to an award line with a grant before you configure payroll costing allocations. Use the grant start and end date feature.
Work-Study	Work-Study enables you to maintain funds and employment for students with financial need. You can assign and manage standard work-study funding from award assignment automatically through payroll processing. Predefined work-study costing rules allow payroll accounting to account for work-study funding. You can identify the pay groups that include work-study workers so that Workday can efficiently process work-study pay.

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 create accounting journals, Workday converts transaction currency into the company currency after net pay validation.

When you set pay groups and company accounting to different currencies, Workday calculates payroll in the pay group currency and passes the results to accounting in both currencies. Currency revaluations can lead to unrealized exchange gains or losses when you produce financial statements for ledger accounts with transactions in foreign currencies.