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

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

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

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

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

Salary Encumbrance vs. Benefit Encumbrance  HR/PR > Employees > Employee Journal Unposted Deduction Journals indicate that benefits are currently encumbered.

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

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.

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

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

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

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

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

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

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!!

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

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

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

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, Pre Encumbered

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

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!

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

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

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.

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

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)

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.

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!

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

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!

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

Common Mistakes with Encumbrance And now…

$$$$$$$$ 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

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

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

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.

Common Mistakes with Encumbrance #1 Not 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

Managing Payroll Encumbrances Questions?