Earnings and Deductions

Set up deductions and earnings using precise criteria because it allows the calculation engine to function most efficiently. If you do not set up pay component eligibility, Workday tries to calculate the payroll for every run category, pay group, worker, and for all pay runs.

When specifying the worker eligibility and scheduling criteria, you can use a Workday-owned calculation or create your own. View available calculations on these reports:

To create your own rules, select Create from the Worker Eligibility prompt or the Scheduling prompt. You can create true or false calculations:

When specifying the Worker Eligibility and Scheduling criteria, all criteria that you specify in the same row must be met (AND logic). If you define criteria in separate rows, the criteria in at least one row must be met (OR logic).

In the Calculation Details section, you construct the payroll calculation that returns the final earning value. Known as related calculations, the operands of the calculation can be nested calculations. Workday delivers many calculations and related calculations that you can select, such as Hours (prorated) * Rate. You can also create your own calculations and related calculations.

In the following example, the calculation retrieves the value of the worker's compensation element value. The specific compensation element is in the Compensation Element section (shown later). This value can be base pay or an allowance plan, such as the one we created for mileage allowance.

Workday offers the following optional features that affect pay component calculation:

In Workday, proration is the creating of subperiods in response to a midperiod change. There are two types of proration:

For both types of proration, you can enable your pay components to return a prorated amount for each subperiod. You can choose to prorate by:

The following table shows a list of midperiod changes that cause proration:

Use the Related Calculations grid to retrieve values from other calculations and build more complex calculations. A related calculation used in the definition of an earning or deduction is a Pay Component Related Calculation (PCRC). PCRCs are available for display on payslips and in other payroll reports. You can use the same PCRC in multiple earnings and deductions.

The following screen displays the Double Time [CAN] earning calculation Hours (unprorated) * Rate, which comprises two related calculations:

For hours-related calculations, you can configure Workday to aggregate hours from payroll input and time blocks into condensed result lines. Aggregation can improve the performance of payroll calculations and enhance the readability of payroll results. To enable aggregation, select the Aggregate checkbox in the Related Calculations grid. To configure aggregation for multiple pay components, access the

Maintain Pay Component Related Calculations for Aggregation

task.

Workday can apply limits when calculating a worker's pay. You can:

The following example shows the limits for a 401(k) retirement deduction in the U.S. Based on these limits, Workday deducts the 401(k) pretax employee contribution up to the IRS 401(k) and 415(c) annual limits.

Map the payroll earning to a compensation element so that Workday Payroll knows from which plan to pull compensation values.

When creating an earning that is retrieving a value from Compensation, you map the earning to the compensation element on the Effective Dated tab.

You can map an earning to a time calculation tag so that payroll retrieves approved, calculated time from Workday Time Tracking.

In Workday, we refer to earnings and deductions as pay components. So, an earning is a pay component and a deduction is a pay component. A group of them is a pay component group (PCG).

You can group pay components together into PCGs. Each PCG sums the values of the earnings or deductions it contains. Then, you can display PCG values on payslips and reports. Examples of PCGs include:

For a list of PCGs delivered by Workday, access the

All Pay Component Groups

report.

You can map benefit pay components to a benefit plan. The connection between a pay component and its corresponding plan enables Workday Payroll to retrieve the correct values based on the worker's benefit elections.

By default, a worker's earnings and deductions are allocated to the:

You can override the default allocation for all instances of a given earning by configuring the Costing section of the earning. You can specify how to allocate the earning across:

The Pay Component Security Segment area appears when you secure specific pay components to specific security segments. You can create security segments to make pay components viewable for others (managers, benefits partners) who may need to see the resolved value of an earning or deduction. The values are inaccessible to these roles without the security segments.

The Usage section identifies where the earning is used, as shown below.

To adjust net pay during payroll processing, Workday first performs an initial gross-to-net calculation (excluding arrears amounts). This calculation verifies that an employee's net pay is at, or above, the net pay minimum (0 by default).

For example, when calculating net pay, Workday deducts only the current period values of deductions A, B, and C (100 + 50 +25), not the arrears amounts.

For employees with positive net pay (net pay > minimum net) and no arrears, there are no subsequent calculations. In this example, only the initial calculation applies.

When performing net pay validation, Workday Payroll compares the worker's net pay to the minimum net amount:

Below is an example of the

Maintain Deduction Priorities

page. The highest priority deductions are at the top of the grid and the lowest priority at the bottom.

Following are descriptions of each option.

You do not need to track or recoup arrears for every deduction that you select for net pay validation. For example, you may decide to reduce or eliminate deductions from payroll calculations in a specific order. However, you do not need to recover these deductions in subsequent payroll calculations. For deductions that you do not want to recoup in subsequent calculations, do not select the Recoup Arrears checkbox.

For each deduction configured to recoup arrears, select the deduction's Related Actions icon, and then select

Deduction

>

Edit Net Pay Validation/Arrears

to establish the arrears limits.

Use the Edit Net Pay Validation/Arrears page to:

Conditional limits have priority over default limits; if Workday cannot find a matching limit based on pay group, run type or other criteria, it applies the default limit.

Workday evaluates the deduction against the rule conditions defined in each row (from first to last) of the grid in order to determine the limits to apply.

The following image is an example of the Edit Net Pay Validation/Arrears page showing both default and conditional arrears limits.

The following are descriptions of the fields in Default Recoup Arrears Limits section.

Below are descriptions of the fields you can specify for each row in the table.

Workday uses the following logic to determine the arrears limits for a deduction:

When you edit a pay component, you have the option to add a new effective date to create a new pay component definition as of the effective date. If you edit an earning or deduction in the middle of a pay period, the change applies to the whole pay period.

Subtabs will display for each pay component definition of the Effective Dated tab.

To inactivate an earning, select the Related Action icon on the pay component and then select Earning > Edit As Of. Select the effective date and select OK. Scroll down to the Effective Dated tab and set the earning to Inactive.

There are some considerations you should be aware of when inactivating a pay component.

Access the

Delete Calculation

task to remove pay components not in use.