Payroll Costing Allocations

Understand payroll costing and accounting processes

The Assign Costing Allocation task in Workday is used to assign a funding source to an employee/position, specifying which account payroll expenditures will post to and which account they will encumber. Three costing levels can be updated through the task:

• Worker-Position Allocation: Primary funding method, all positions should have a worker-position allocation.
• Worker-Position-Earning Allocation: Should be used when funding a specific earning differently from the existing Worker-Position Allocation. Example: Wanting to pay a bonus using a different account than the employee’s regular pay. Should not be used in place of a Worker-Position Allocation to fund base pay.
• Position Restriction Allocation: Primarily used as a backup funding source that will be in effect when no existing worker-position or earning allocation is covering the current pay period. PG00001 GU-Payroll Expense Clearing-AGY was assigned as the position restriction account for all positions when Workday went live. Workday does not allow position restriction allocations for jobs under the Job Management staffing model.  

If there is no valid costing allocation in effect for the pay period, expenses will be posted to the default organizational assignment. Payroll should never be posted to the default organizational assignment, as it consists only of a cost center and a fund (FD7920) and lacks a driver worktag — program, gift, grant or project. Any payroll posting to the Payroll Expense Clearing program (PG00001) or the default organizational assignment must be corrected through a payroll accounting adjustment.  

Refer to the Assign Costing Allocations work instructions for detailed steps on completing a costing allocation.

The Create Payroll Accounting Adjustment task in Workday enables you to modify payroll journal lines after payroll has been completed. Through a payroll accounting adjustment, posted payroll expenditures can be transferred from the original account to a new funding source. This allows department users to correct costing allocation issues or transfer money for budgetary purposes. Payroll Accounting adjustments can only be used to adjust funding; they cannot be used to update items such as the earnings code, position number, pay period, budget dates, etc. 

All payroll accounting adjustments require cost center manager approval, with those containing grants or central project requiring additional approval. The user must request the Payroll Accounting Adjustment Initiator role in Workday to process payroll accounting adjustments. Be cautious when entering or approving payroll accounting adjustments, as the process allows the use of unconnected cost centers and worktags.

Refer to the Create Payroll Accounting Adjustment work instructions for more details. 

Payroll encumbrances are used for budgetary purposes. They project the expected payroll expenditure for the fiscal year-end. The calculation includes the days after the last pay period end date of the fiscal year up to June 30. Base pay and select period activity pay/allowances are encumbered, along with the related ERE charge. However, with the change to Workday, tuition remission is no longer encumbered. The following earning codes are configured in Workday to generate a payroll encumbrance:

Due to Workday system limitations, departments may see encumbrances drop for employees on certain types of leave with pay, such as parental leave.  

The initial payroll encumbrance is run at the start of each new fiscal year and posts with a July 1 accounting date — Journal Sources: Payroll Obligation and Fringe Benefit Obligation. It is offset each pay period through payroll liquidation journal entries that reduce the encumbrance total at the end of the payroll cycle — Journal Sources: Payroll Obligation Liquidation and Fringe Benefit Obligation Liquidation.

Payroll encumbrance adjustments are triggered by position changes resulting from a completed business process. The following are some examples that might initiate a payroll encumbrance adjustment:

• Hires, terminations or transfers
• Compensation changes
• Adding or removing a period activity pay or allowance
• FTE changes
• Costing allocation updates

The Payroll Commitment Adjustment process runs twice a week, on Monday and Thursday. Once the resulting journal has been reviewed and approved by Commitment Accounting, encumbrance balances will be updated to reflect the job changes — Journal Sources: Payroll Obligation Adjustment and Fringe Benefit Obligation Adjustment. The Payroll Commitment Summary report in Workday can be utilized to provide further detail into payroll encumbrance transactions. 

The department now handles federal work-study earnings splits through the Assign Costing Allocations business process. Eligible work study students should be under the “Federal Work Study 70/30% ASU” or the “Federal Work Study 100%” organizational assignment. Student work-study award balances are integrated into Workday each pay period. Those students with an award balance and the proper organizational assignment will be paid using the Federal Work Study: Within Balance — FWSB earnings code. To ensure the appropriate work study earnings split, the department should complete a Worker-Position-Earning costing allocation on the FWSB earnings code. Depending on the work-study program, the costing allocation should be as follows:

In the instance of a 70%/30% split, the remaining 30% should be allocated to a department account.  

If earnings paid to the student exceed the work-study award balance, the Federal Work Study: Grant Exhausted — FWSG — earnings code will be used instead. The FWSG earnings should follow the regular Worker-Position costing allocation and charge 100% to the department account. For this process to work correctly, the department must have both the FWSB Worker-Position-Earning and a Worker-Position costing allocation in place.  

Refer to the Assign Costing Allocation for Federal Work Study work instructions for more information.

• Payroll initial encumbrances: July 1
• Payroll accounting adjustments: Daily
• Payroll encumbrance adjustments: Twice a week, on Monday and Thursday
• On and off-cycle payroll expenditures: Tuesday of payroll week, after payroll processing completes
• Payroll encumbrance liquidations: Tuesday of payroll week, after payroll processing completes
• Year-end payroll accrual: Same date as the last pay period of the fiscal year

*Payroll journals are viewable right when the new pay period is calculated. They should be reviewed before payroll is completed to ensure accuracy and prevent overpayments.

*Note: Fringe is the Workday term for employee-related expenses.