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

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 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!

Pre-Encumbrance vs. Actual EncumbranceSalaries and Benefits Galore!

Encumbrance Ratio

Common Mistakes with EncumbranceAnd now…

$$$$$$$$

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

Managing Payroll Encumbrances

Questions?