managing payroll encumbrance prepared by mike martinez financial systems operations manager as of...
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Managing Payroll Encumbrance
Prepared by Mike Martinez
Financial Systems Operations Manager
As of IVEE 3.1.84
Managing Payroll Encumbrance
Salary Encumbrance vs. Benefit Encumbrance
Pre-Encumbrance vs. Actual Encumbrance
Common Mistakes with Encumbrance
Salary Encumbrance vs. Benefit EncumbranceSalaries are encumbered in the Employee Position!
Payroll Journal = Encumbrance
Benefits are encumbered either in the Payroll Journal or through a special action in Process Payroll!
Single biggest source of bad encumbrance in IVEE
Salary Encumbrance vs. Benefit Encumbrance HR/PR > Employees > Employee Positions and Pay
Unposted Pay Journals indicate that this position has salary encumbered.
Salary Encumbrance vs. Benefit Encumbrance HR/PR > Employees > Employee Journal
Unposted Deduction Journals indicate that benefits are currently encumbered.
Salary Encumbrance vs. Benefit EncumbranceSo what’s the difference?
Salary encumbrance is almost created AutoMagically every time you create/modify an employee position.
Salary Encumbrance vs. Benefit EncumbranceSo what’s the difference?
Benefit encumbrance MUST be EXPLICITLY CREATED by someone in Payroll.
Benefit encumbrance does NOT change or get created automatically.
Must be maintained.
Salary Encumbrance vs. Benefit EncumbranceSo how do you create/maintain Benefit Encumbrance?Individual Employee
PR > Employees > Employee Maintenance
Salary Encumbrance vs. Benefit EncumbranceSo how do you create/maintain Benefit Encumbrance?Individual Employee
PR > Employees > Employee Maintenance
Salary Encumbrance vs. Benefit EncumbranceSo how do you create/maintain Benefit Encumbrance?Individual Employee
Salary Encumbrance vs. Benefit EncumbranceSo how do you create/maintain Benefit Encumbrance?All Employees
PR > Payroll Processing > Process Payroll
Salary Encumbrance vs. Benefit EncumbranceSo how do you create/maintain Benefit Encumbrance?All Employees
PR > Payroll Processing > Process Payroll
Salary Encumbrance vs. Benefit EncumbranceSo how do you create/maintain Benefit Encumbrance?All Employees
PR > Payroll Processing > Process Payroll
Salary Encumbrance vs. Benefit EncumbranceWhat do these processes do?
Calculates and creates actual encumbrance for all benefits (employer AND employee) for the entire year.
Relieves benefit encumbrance for any termed employees
Does NOT affect Pre-Encumbrance!!
Pre-Encumbrance vs. Actual Encumbrance
Pre-Encumbrance encompasses any VACANT positions and the benefits that go along with them. Pre-Encumbrance is optional, it is something you
MIGHT pay Benefits require special attention
Actual Encumbrance is the Salary and Benefits encumbered in the payroll and deduction journals. Obligation to pay due to contract Actual Encumbrance is something you MUST pay
Pre-Encumbrance vs. Actual EncumbranceSo how do you USE Pre-Encumbrance?GL > Configuration > General Ledger Default Settings
Pre-Encumbrance vs. Actual EncumbranceSo how do you USE Pre-Encumbrance?GL > Configuration > General Ledger Default Settings
Pre-Encumbrance vs. Actual EncumbranceSalary Pre-Encumbrance – Vacant PositionsPR > Employees > Employee Position and Pay
Pre-Encumbrance salary amounts are ratios!Number of Days Left on Work
CalendarNumber of Days Total on Work
Calendar
= Encumbrance Ratio
Encumbrance Ratio * Position Amount = Pre-Encumbrance Amount
Pre-Encumbrance vs. Actual EncumbranceSalary Pre-Encumbrance – Vacant PositionsPR > Employees > Employee Position and Pay
Pre-Encumbrance salary amounts are ratios!96 Days Left
181 Day Work Calendar = 53.04% Encumbrance
53.04% * $42,000 = $22,276.24 Pre Encumbered
Pre-Encumbrance vs. Actual EncumbranceSalary Pre-Encumbrance – 0-Hour Time Cards
Only for Hourly/Timecard positions with ZERO Hrs/Day!
Pre-Encumbrance amount based off Pre Enc minus FTD.
$2,000 - $
410$1,590
Pre Enc Paid FTD Pre Encumbered
Pre-Encumbrance vs. Actual EncumbranceSalary Pre-Encumbrance – 0-Hour Time Cards
WHY?
Encumber salary for positions you plan to pay on but may not know how often this employee will work!
Pre-Encumbrance vs. Actual EncumbranceSo where does Benefit Pre Encumbrance happen?GL > Budgeting > Position Budget Modeling > Position Budget Template
Wait… what?!
Pre-Encumbrance vs. Actual EncumbranceSo where does Benefit Pre Encumbrance happen?GL > Budgeting > Position Budget Modeling > Position Budget Template
Pre-Encumbrance vs. Actual EncumbranceTo Pre-Encumber benefits you must create Templates!
Create a Position Budget Template for each best-guess combination of employer paid benefits.
Pre-Encumbrance vs. Actual EncumbranceAdd a Position Budget Template, then Add any Employer Paid Benefits you wish to Pre-Encumber.
Add a record for benefits such as:• FICA• ASRS• Health Insurance• Worker’s Comp
Pre-Encumbrance vs. Actual EncumbranceBegin adding all applicable benefits to pre-encumber
Input the EXPENSE offset for any deductions.
Set either a flat ER Amount or ER Percent
Set Pre-Encumbrancefor either Position or Supplemental. (Recommend: All)
Pre-Encumbrance vs. Actual EncumbranceCreate a few types of templates…
Once your templates are created then you’ll need to assign them in Payroll.
Pre-Encumbrance vs. Actual EncumbranceNow assign the template to the vacant position!PR > Employees > Employee Positions and Pay
The Position Budget Template should be set appropriately to match what benefits you would like to pre-encumber for the position.
Only effective for VACANT positions!
Pre-Encumbrance vs. Actual EncumbranceNow let’s pre-encumber those benefits!GL > Budgeting > Position Pre Encumbrances > Position Pre Encumbrance
Pre-Encumbrance vs. Actual EncumbranceNow let’s pre-encumber those benefits!GL > Budgeting > Position Pre Encumbrances > Position Pre Encumbrance
Allows you to view and regenerate pre-encumbrance!
$$$$$$$$
Common Mistakes with Encumbrance
#5Not pre-encumbering benefits for vacant positions.
Social Security – 6.2%Medicare – 1.45%Retirement – 11.3%
Health InsuranceDental InsuranceVisions Insurance
Common Mistakes with Encumbrance
#4Unintentionally reducing encumbrance for One-Time pays
Set Beginning and Ending dates and pay periods as narrow as possible!
Common Mistakes with Encumbrance
#3That position has been vacant for Too Long!If keeping it for the Position Control
Code, then make sure the Position Amount is set to $0.00
Common Mistakes with Encumbrance
#2Over-encumbering for Terminated Employees!
Position End Dates and Pay Period should be set AND a Compute All Year done from the Payroll Journal screen.
Common Mistakes with Encumbrance
#1Not Encumbering Benefits!
Run Compute Selected Periods on a Periodic basis in Payroll!
Managing Payroll Encumbrance - Recap
Salary Encumbrance vs. Benefit Encumbrance
Pre-Encumbrance vs. Actual Encumbrance
Common Mistakes with Encumbrance