Concept: Reference Wages for Severance Allowances (FRA)
To calculate a severance allowance, Workday calculates an average of the worker's full-time
equivalent (FTE) taxable wages during the:
- Past 3 months before the notification date.
- Past 8 to 12 months before the notification date, depending on the available wages.
Pay Component Groups
Before setting up severance allowances, you can define which earnings to include in the
referenced taxable wages. In addition to the worker's gross wages, Workday uses
these pay component groups to determine the FTE taxable wages.
Pay Component Group | Impacts 12-month FTE taxable wages | Impacts 3-month FTE taxable wages |
|---|---|---|
FRA Adds to FTE 3 Months Taxable Wages Average [FRA]
| X | |
FRA Bonuses with a Semi Yearly Frequency to be Subtracted from
Taxable Wages for 3 Months Severance Reference Taxable
Wages
| X | |
FRA Bonuses with a Yearly Frequency to be Subtracted from Taxable
Wages for 3 Months Severance Reference Taxable Wages [FRA]
| X | |
FRA Bonuses with Other Frequency to be Subtracted from Taxable Wages
for 3 Months Severance Reference Taxable Wages [FRA]
| X | |
FRA FTE Unprorated Payroll Variables to be Subtracted from Severance
Reference Taxable Wages [FRA]
| X | X |
FRA Subtracts from Both Reference Taxable Wages [FRA]
| X | X |
Unprorated Earnings
For earnings not paid on a monthly basis, you need to calculate a prorated amount to include
the reference taxable wages.
- Annual and Semiannual Bonuses
- Workday prorates annual and semiannual bonuses for the 3-month FTE reference wages. To identify which earnings to prorate, add them to one of these pay component groups:
- FRA Bonuses with a Semi Yearly Frequency to be Subtracted from Taxable Wages for 3 Months Severance Reference Taxable Wages [FRA]
- FRA Bonuses with a Yearly Frequency to be Subtracted from Taxable Wages for 3 Months Severance Reference Taxable Wages [FRA]
- Bonuses with Other Frequencies
- You can manually prorate the earning amount for bonuses with frequencies other than annual or semiannual.Workday recommends that you create 2 earnings:
- An earning for the full bonus amount, paid at the actual frequency.
- An earning with a prorated monthly amount, paid at a monthly frequency.
To define which earning Workday includes in the reference wages, add each earning to the appropriate pay component group.ScenarioEarningPay Component GroupExclude the full amount from the reference wage calculation.Earning for the full bonus amount.FRA Bonuses with Other Frequency to be Subtracted from Taxable Wages for 3 Months Severance Reference Taxable Wages [FRA]Include a prorated amount for the 3-month FTE reference wage.Earning with the prorated monthly amount.FRA Adds to FTE 3 Months Taxable Wages Average [FRA]To calculate the prorated earning without including it in the worker's monthly salary:- Don't add theFRA Adds to Gross [FRA]pay component group to the prorated earning.
- Select the prorated earning from theAdditional Pay Components to Calculateprompt on the run category.
- Payroll Variables Not Requiring Proration
- For some payroll variables not associated with a frequency, the severance reference taxable wages need to include the full amount of the earning. To define the amount included in the reference wages, add the earning to the appropriate pay component group.ScenarioEarningPay Component GroupInclude the full earning amount in the reference wages without proration.Earning for a payroll variable not associated with a frequency.FRA FTE Unprorated Payroll Variables to be Subtracted from Severance Reference Taxable Wages [FRA]