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Last Updated: 2025-03-14
Setup Considerations: Time Off Calculations for Payroll

Setup Considerations: Time Off Calculations for Payroll

You can use this topic to help make decisions when planning your configuration and use of time off calculations in Absence Management with Workday Payroll. It explains:
  • Why to set them up.
  • How they fit into the rest of Workday.
  • Downstream impacts and cross-product interactions.
  • Security requirements and business process configurations.
  • Questions and limitations to consider before implementation.
Refer to detailed task instructions for full configuration details.

What They Are

Time off calculations provide paid and unpaid time off totals for workers for a given period of time. You can use these calculations in earnings for Workday Payroll processing so that you can pay workers for the time off.

Business Benefits

Workday Payroll seamlessly integrates with Absence Management to enable you to pay workers for time off or record unpaid time off.
Absence Management automatically creates calculations for time off that you can use as inputs to payroll calculations, helping ensure you have up-to-date information in your payroll calculations. You don't have to use integrations to load absence data.

Use Cases

You can create earnings in Workday Payroll to:
  • Pay a worker for a single paid time off.
  • Pay a worker for position-based time offs, which can include multiple jobs, each with different rates of pay.
  • Reduce a worker's base pay for time off, to avoid double payment of time off. Example: Base an earning calculation on the total time off for a type of absence.
  • Track hours worked for reporting purposes.

Questions to Consider

Questions
Consideration
What time off inputs do you use in your payroll calculations?
When you create time offs, Workday automatically creates Absence Component Related Calculations (ACRCs) that you can use as inputs to payroll calculations to configure time off earnings. ACRCs retrieve the amount of approved time off units (days or hours) in the current payroll period for a worker, where
xxx
 is the time off name:
  • xxx - Time Off Paid
  • xxx - Time Off Unpaid
  • xxx - Time Off Total
Example: When defining an earning for paid vacation, you can select:
  • Time Off Paid (Units) * Rate
     as the calculation rule.
  • Time Off Paid (Units)
     as a related calculation.
  • Vacation - Time Off Paid
    , the automatically generated ACRC, for the override value.
The
Time Off Paid
 and
Time Off Unpaid
 ACRC values depend on what is above and below the lower limit on the time off plan. These calculations aren't necessarily what's paid and unpaid in payroll. That depends on how you create your earnings and set up your Pay Component Related Calculations (PCRCs) on the Payroll side.
What calculations do you use to pay workers during their time off?
Workday Payroll considers workers on time off to be active and continues to apply their standard earnings and deductions during their time off. Use ACRCs to configure specific earnings and deductions for workers based on the amount of time off taken. Examples: You can create:
  • Deductions to reduce a worker's salary based on the amount of time off taken.
  • Earnings to pay a worker for the amount of time off taken.
To discontinue a worker's pay during their time off, consider creating a leave type with payroll effect enabled. Alternatively, you can create deductions to deduct pay.
How do you want to handle time off that has occurred in the past?
When you enter time off for a worker after you complete payroll, you can run a retroactive payroll calculation. When you enter retroactive time off, the retro pay calculation recalculates:
  • Paid or unpaid time off earnings directly affected by the change.
  • Earnings indirectly affected by the change. Example: A time off that reduces base pay earnings.
Workday then:
  • Reports the differences between the original and recalculated payroll results.
  • Transfers any differences to the current period.
Retro gets the latest value for the period from Absence based on the latest configuration. If you change your time off plan, effective dated changes use the configuration validations in effect at the time of the time off request. While effective dated changes don't trigger retro, Workday detects these changes when you process retro payroll.
Absence events that trigger retro to run for a completed period include:
  • Absence Input Change
  • Absence Limit Override Change
  • Calculated Balance Override
  • Correct Time Off
  • Enter Time
  • Request Time Off
What earnings and deduction-related time offs do you need to set up?
When creating earnings or deductions-related time offs, ensure that you configure them to recalculate in any retroactive calculations.
How do you handle time off corrections?
You can correct approved time off for workers on their behalf in Absence Management.
Add payroll input to adjust payroll calculations, but Workday recommends that you first modify the information in Absence.
When you correct a time off that you’ve already processed in payroll, run a retroactive calculation to account for the correction in a completed payroll period. When the period is still in progress, you can just run pay calculation.
When you correct a time off that changes worker pay during a calculation run that hasn't completed, Workday identifies the pay result as requiring recalculation. When payroll runs again, Workday recalculates the result.
On the
Run Pay Calculation
 task, you can limit calculations to workers with payroll-impacting events by selecting:
  • Smart Calculation
    : Workday automatically detects the change.
  • Smart Calculation Based on Events
    : You need to select a time off event type.
What waiting periods do you want to implement to prevent new employees taking paid time off until they pass a probationary period?
You can define eligibility rules on time off plans. Eligibility determines who can take time off and when.
Example: You want workers to be eligible for a plan but not able to take paid time off until they reach 90 days of employment. Eligibility rules drive the time off visibility for your workers.
You can create an absence table with a tier for each plan, each with a different rate of pay. Configure your payroll to apply the appropriate rate of pay to each time off tier. When a worker is eligible for some but not all tiers, Workday deducts time off from tiers they’re eligible for. In this case, you can add a tier that pays employees zero percent of their salary when they've less than 90 days continuous service.
How do you want to limit the amount of paid time off that employees can take?
You can define:
  • Lower limits on time off plans. Workday processes the time off up to and including the lower limit as paid time off. Any hours that exceed the limit are unpaid.
  • Time off validations for workers when they request time off.
Example: You only want to pay your employees for what they accrue in their Absence balance and nothing more. The
Maximum Unpaid Time Off Units Allowed
 validation enables you to:
  • Place a limit on the amount of unpaid time off that a worker can request.
  • Prevent employees requesting unpaid time off by selecting
    0
     (zero).
How do you want to pay workers who change jobs within the company?
Configure these accrual options that dictate whether to prorate accruals when eligibility changes occur midperiod:
  • Front-loaded: As transfers, promotions, and other staffing changes occur in your organization, workers might lose eligibility for an accrual that they've already received. You can automate the proration of a worker's front-loaded accrual when the worker loses accrual eligibility due to a job change.
  • Based on as-of-date: You can automate the proration of a worker's accrual based on the date of transfer.
  • None.
How do you want to handle time off for workers with multiple positions?
Configure your tenant for multiple jobs and create position-based earnings to calculate paid or unpaid time for position-based time off plans. When you run pay calculation, Workday Payroll retrieves time off units for the:
  • Relevant position, when the earning and time off plan are position-based.
  • When the earning is worker-based but the time off plan is position-based, the worker's:
    • Processing position (CAN, USA).
    • Primary position (FRA, UK).
  • Worker, when the earning is position-based but the time off plan is worker-based. The position-based earning resolves separately for each of the worker's positions, and it uses the time off units for the worker in each calculation.
    Example: When a worker requests 8 hours off, Workday uses 8 hours in the earning calculation for each position.
    Use calculations to support the proration of time off units across positions to prevent Payroll paying employees twice for the same time off. Example: Prorate units based on full-time equivalent (FTE) and scheduled weekly hours.
How do you want to handle termination payouts when employees leave your company?
You can configure time off plans with:
  • Time offs that pay out the time off balance to the employee when employees terminate midway through the calendar year.
  • Accruals that recoup time taken that's over the earned amount at time of termination.
    Example: You can create nested arithmetic calculations for Absence that calculate the accrual amounts.

Recommendations

Define negative earnings rather than deductions to calculate the value of unpaid time off and reduce gross pay.
When creating and editing earnings or deductions, add comments to clarify their usage. Example: Explain that workers earn different rates of pay for each position, and the corresponding hourly rate or base pay for salaried workers.

Requirements

Use ACRCs in earnings and deductions but for accurate calculations, don't reference other earnings or deductions that refer to ACRCs indirectly.

Limitations

You can only use time off plans that track balances with Workday Payroll.

Tenant Setup

To enable you to create position-based time off plans and earnings, configure your Workday tenant to support multiple jobs on the
Edit Tenant Setup - HCM
 task.

Security

Domain
Considerations
Reports: Pay Calculation Results for Pay Group (Results)
 in the Core Payroll functional area.
Users secured to this domain can view:
  • Pay calculations results for pay groups.
  • Hours worked on payroll registers by period schedule or balance period.
Reports: Pay Calculation Results for Worker
 in the Core Payroll functional area.
Users secured to this domain can view pay calculation results for workers.
Set Up: Payroll - Pay Group Specific
 in the Core Payroll functional area.
Users secured to this domain can access reports and tasks associated with pay groups.
Set Up: Calculations - Generic
 in the Core Payroll functional area.
Set Up: Payroll (Calculations - Payroll Specific)
 in the Core Payroll functional area.
Set Up: Time Off (Calculations - Absence Specific)
 domain in the Time Off and Leave functional area.
Set Up: Time Off (Calculations - Generic)
 domain in the Time Off and Leave functional area.
Users secured to these domains can:
  • Create, view, and edit calculations for Workday Payroll and Absence Management.
  • Create and edit earnings.
These domains in the Time Off and Leave functional area.
  • Worker Data: Time Off (Time Off Balances)
  • Worker Data: Time Off (Time Off Balances Manager View)
Users secured to these domains can view time off reporting data for workers.
You are responsible for testing and validating that security domain settings meet your business needs.

Business Processes

You can configure the
Pay Cycle Event
 business process to specify the sequence of payroll processing tasks in your organization and the roles responsible. Example: Add a
To Do
 step to verify time off results before processing payroll.

Reporting

Reports
Considerations
All Calculations
Displays all calculations in your tenant. You can search by Absence category and then filter by the Absence Component Related Calculation type.
Payroll Register by Period
Displays payroll totals for a pay period, pay group, or pay run group, including earnings.
My Time Off Results by Period
Time Off Results by Period
Time Off Results by Period for Workers
Displays:
  • Accruals, paid, and unpaid time off for each period.
  • Time offs to pay out when a worker is terminated.
View Payroll Results
Displays calculated payroll results on the worker profile. To verify that complex or new configurations are displaying expected results, including earnings, view worker results on this report before completing a payroll.
View Period Schedule
Enables you to identify the:
  • Time off plans in Absence that use the period schedule.
  • Pay group usage in Payroll.
View Time Off Balance
Displays paid time off year to date.

Integrations

Web Services
Considerations
Get Payroll Results
Enables you to view pay results for specific workers and companies, and pay calculations for specific date ranges.
Put Period Schedule
Enables you to specify a period schedule for a time off plan. The period schedule must exist in Workday.

Connections and Touchpoints

Touchpoint
Consideration
Calculations
You can share calculations between the Absence and Payroll functional areas. These high-level categories of calculations reference the same calculation engine:
  • Absence
  • Payroll
  • Generic
You can create simple calculations, or nest calculations by selecting an existing calculation as an operand of another.
Earnings and deductions
A payroll calculation can reference a time off plan through an ACRC and tie calculated hours to an earning. Example: A USA vacation earning is a payroll calculation that includes a worker eligibility rule. The rule limits the population to workers with ACRCs not equal to zero for the subperiod it's calculating.
Holiday calendar and work schedules
These components influence how Workday counts units of time so that a worker's time off doesn't overlap on nonworkdays or company holidays.
Time off requests
Time off transactions are directly related to how Workday records a worker's absence. Time off plans that track balances pass time off to Workday Payroll for use in payroll calculations when:
  • Workers request or correct time off.
  • You enter time off requests on behalf of a worker or correct their time off.
Period schedules
Absence Management and Workday Payroll can share period schedules that dictate:
  • How often you enable your workers to accrue time off in a time off plan.
  • The start and end dates of the periods that retrieve and process time off.
  • The time period for tracking, reporting, and monitoring time for existing balances or liability.
  • Whether to calculate eligibility reporting weekly or monthly.
Period schedules and accrual frequencies can impact how time off is available during a pay period for payroll.
Period schedules are useful when defining employee eligibility rules for a time off plan. Example: You want employees to be full-time as of the start date to be eligible for the time off period.
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.