Managing Payroll Encumbrance

1. Managing Payroll Encumbrance Prepared by Mike Martinez Financial Systems Operations Manager As of IVEE 3.1.84

2. Managing Payroll Encumbrance • Salary Encumbrance vs. Benefit Encumbrance • Pre-Encumbrance vs. Actual Encumbrance • Common Mistakes with Encumbrance

3. Salary Encumbrance vs. Benefit Encumbrance Salaries 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

4. Salary Encumbrance vs. Benefit Encumbrance • HR/PR > Employees > Employee Positions and Pay

5. Salary Encumbrance vs. Benefit Encumbrance • HR/PR > Employees > Employee Positions and Pay UnpostedPay Journals indicate that this position has salary encumbered.

6. Salary Encumbrance vs. Benefit Encumbrance • HR/PR > Employees > Employee Journal

7. Salary Encumbrance vs. Benefit Encumbrance • HR/PR > Employees > Employee Journal UnpostedDeduction Journals indicate that benefits are currently encumbered.

8. Salary Encumbrance vs. Benefit Encumbrance So what’s the difference? • Salary encumbrance is almost created AutoMagically every time you create/modify an employee position. OooOOoooohhhh..

9. Salary Encumbrance vs. Benefit Encumbrance So 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.

10. Salary Encumbrance vs. Benefit Encumbrance So how do you create/maintain Benefit Encumbrance? Individual Employee PR > Employees > Employee Maintenance

11. Salary Encumbrance vs. Benefit Encumbrance So how do you create/maintain Benefit Encumbrance? Individual Employee PR > Employees > Employee Maintenance

12. Salary Encumbrance vs. Benefit Encumbrance So how do you create/maintain Benefit Encumbrance? Individual Employee

13. Salary Encumbrance vs. Benefit Encumbrance So how do you create/maintain Benefit Encumbrance? All Employees PR > Payroll Processing > Process Payroll

14. Salary Encumbrance vs. Benefit Encumbrance So how do you create/maintain Benefit Encumbrance? All Employees PR > Payroll Processing > Process Payroll

15. Salary Encumbrance vs. Benefit Encumbrance So how do you create/maintain Benefit Encumbrance? All Employees PR > Payroll Processing > Process Payroll

16. Salary Encumbrance vs. Benefit Encumbrance What 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!!

17. 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

18. Pre-Encumbrance vs. Actual Encumbrance So how do you USE Pre-Encumbrance? GL > Configuration > General Ledger Default Settings

19. Pre-Encumbrance vs. Actual Encumbrance So how do you USE Pre-Encumbrance? GL > Configuration > General Ledger Default Settings

20. Pre-Encumbrance vs. Actual Encumbrance Salary Pre-Encumbrance – Vacant Positions PR > Employees > Employee Position and Pay Pre-Encumbrance salary amounts are ratios! Number of Days Left on Work Calendar Number of Days Total on Work Calendar = Encumbrance Ratio Encumbrance Ratio * Position Amount = Pre-Encumbrance Amount

21. Pre-Encumbrance vs. Actual Encumbrance Salary Pre-Encumbrance – Vacant Positions PR > 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

22. Pre-Encumbrance vs. Actual Encumbrance Salary 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

23. Pre-Encumbrance vs. Actual Encumbrance Salary 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!

24. Pre-Encumbrance vs. Actual Encumbrance So where does Benefit Pre Encumbrance happen? GL > Budgeting > Position Budget Modeling > Position Budget Template Wait… what?!

25. Pre-Encumbrance vs. Actual Encumbrance So where does Benefit Pre Encumbrance happen? GL > Budgeting > Position Budget Modeling > Position Budget Template

26. Pre-Encumbrance vs. Actual Encumbrance To Pre-Encumber benefits you must create Templates! Create a Position Budget Template for each best-guess combination of employer paid benefits.

27. Pre-Encumbrance vs. Actual Encumbrance Add 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

28. Pre-Encumbrance vs. Actual Encumbrance Begin 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-Encumbrance for either Position or Supplemental. (Recommend: All)

29. Pre-Encumbrance vs. Actual Encumbrance Create a few types of templates… Once your templates are created then you’ll need to assign them in Payroll.

30. Pre-Encumbrance vs. Actual Encumbrance Now 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!

31. Pre-Encumbrance vs. Actual Encumbrance Now let’s pre-encumber those benefits! GL > Budgeting > Position Pre Encumbrances > Position Pre Encumbrance

32. Pre-Encumbrance vs. Actual Encumbrance Now let’s pre-encumber those benefits! GL > Budgeting > Position Pre Encumbrances > Position Pre Encumbrance Allows you to view and regenerate pre-encumbrance!

33. Pre-Encumbrance vs. Actual Encumbrance Salaries and Benefits Galore! Encumbrance Ratio

34. Common Mistakes with Encumbrance And now…

35. Common Mistakes with Encumbrance #5 Not pre-encumbering benefits for vacant positions. $$$$$$$$ Social Security – 6.2% Medicare – 1.45% Retirement – 11.3% Health Insurance Dental Insurance Visions Insurance

36. Common Mistakes with Encumbrance #4 Unintentionally reducing encumbrance for One-Time pays Set Beginning and Ending dates and pay periods as narrow as possible!

37. Common Mistakes with Encumbrance #3 That 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

38. Common Mistakes with Encumbrance #2 Over-encumbering for Terminated Employees! Position End Dates and Pay Period should be set AND a Compute All Year done from the Payroll Journal screen.

39. Common Mistakes with Encumbrance #1 Not Encumbering Benefits! Run Compute Selected Periods on a Periodic basis in Payroll!

40. Managing Payroll Encumbrance - Recap • Salary Encumbrance vs. Benefit Encumbrance • Pre-Encumbrance vs. Actual Encumbrance • Common Mistakes with Encumbrance

41. Managing Payroll Encumbrances Questions?