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    Compensation Basis
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    Compensation Basis

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    Article summary

    A Compensation Basis encompasses various components like salary, bonuses, commissions, and allowances, defining the total earnings for employees within an organization.

    The following are the different Compensation Basis options and examples for each available to select when you are adding a compensation item.



    % of Wages

    The % of Wages type compensation item opens the Workforce Administrator to enforce a calculation such as % of Gross Pay. Click here to learn more about this compensation basis option.

    Illustration of Use

    Compensation Item – Employer Match of Medicare Tax is setup with basis type of % of Wages and is calculated as 1.45% of Gross Pay

    Gross Pay: Fulltime Salary + Overtime Salary + Accrued Vacation


    %

    Jul 2019


    Aug 2019


    Sep 2019


    Oct 2019


    Nov 2019


    Dec 2019


    Jan 2020


     

    %

    Jul 2019

    Aug 2019

    Sep 2019

    Oct 2019

    Nov 2019

    Dec 2019

    Jan 2020

    FT Salary

     

    1000

    1000

    1100

    1100

    1100

    1100

    1100

    Overtime

     

    100

    100

    100

    100

    100

    100

    100

    Accrued Vacation

     

    100

    100

    110

    110

    110

    110

    110

     

     

     

     

     

     

     

     

     

    Medicare Tax

    1.45

    17.4

    17.4

    19

    19

    19

    19

    19



    % of Wages with Annual Cap

    % of Wages with Annual Cap works similar to % of Wages with an additional ability to specify an annual cap on the compensation item. Annual cap is calculated based on the budget year. Click here to learn more about this compensation basis option.

    Illustration of Use

    Suitable for compensation items such as FICA Tax, which is calculated as 6.2% of Wages with a cap of $5264 per year.

    The Direct Data Input type Compensation item allows you to directly enter the relevant budget amounts for the compensation item. Click here to learn how to input data using the Direct Data Input Compensation Item

    Illustration of Use

    Employee: Jonas Williams


    Jul '19

    Aug '19

    Sep '19

    Oct '19

    Dec '19

    Jan '20

    Feb '20

    Bonus

     

    1000

     

     

     

    500

     

    In the above example, this Budget manager directly budgeted for a bonus of $1000 in Aug 2019 and another bonus of $500 in Jan 2020 for Jonas Williams.


    Fixed Amount

    The Fixed Amount basis opens the same compensation amount for all periods and all employee types that use this basis. Click here to learn more about the Fixed Amount compensation item.

    Illustration of Use

    All Full-Time employees get a lunch allowance of $100 per month.


    Fixed Amount Based on Employee Attribute

    This compensation basis is typically used for fixed dollar compensation payment based on the employee attribute. Click here to learn more about this option.

    Illustration of Use

    • Employee: Jonas Williams
    • Compensation Item: Workmen Compensation
    • Workmen Compensation Class Attribute: WC1 (construction worker)
    • Fixed $ amount per month: $125 per month

    Jul 2019


    Aug 2019


    Sep 2019


    Oct 2019


    Nov 2019


    Dec 2019


    Jan 2020


    Feb 2020


    Workman's Comp

    125

    125

    125

    125

    125

    125

    125

    125



    Fixed Amount per FTE

    Fixed Amount per FTE is typically used for fixed dollar compensation payment based on the FTE of the employee. Click here to learn more about this compensation item.

    Illustration of Use

    Employee: Jonas Williams

    FTE Value for Jonas Williams: 0.5

    Compensation Item: lunch allowance

    Fixed Amount of Lunch Allowance per FTE: $250 per month/FTE

    The Rate x Hour compensation item calculates the total payment by multiplying the hourly rate by the number of hours worked, determining the earnings for a given period based on the rate and hours.

    Here are the different options available once you select the Rate x Hour compensation basis:


    The Rate x Hours type compensation basis would use the following data to calculate employee compensation amounts in the Workforce Budget:

    Rate per Hour in $ (not wage rate – for wage calculations, wage type calculation basis is recommended)

    Compensation Amount = Rate per Hour x Hours per Month

    Illustration of Use 

    • Example 1
      Employee: Jonas Williams (Full-time Employee)
      Over Time Compensation
      Rate per Hour: $40 per Hour
      Budgeted Overtime Hours: 10 Hours per month
      Budgeted Overtime Compensation per month: $400 per month

    • Example 2
      Employee: Janitorial Staff (Hourly Worker)
      Rate per Hour: $10 per Hour
      No of hours per month: 20 Hours
      Monthly Pay: $200 per month

    Tiers on Employee Attribute – Value in % Wages

    This compensation basis can be used to build a tier structure of an employee benefit plan and to specify the compensation value as a % of Wages. Click here to learn more about this option.

    Illustration of Use

    Compensation Item: Contribution to Employee Retirement Plan
    Basis: Years of Service of the Employee

    • 0 < Employee Years of Service <= 5 Years : 5% of Wages
    • 5 < Employee Years of Service <= 10 Years : 6% of Wages
    • 10 < Employee Years of Service : 7% of Wages

    Employee: Jonas Williams

    Date of Hire: 1-Aug-2014

    (Notice that Years of service for this employee crosses 5 in September 2019)


    Jul 2019


    Aug 2019


    Sep 2019


    Oct 2019


    Nov 2019


    Dec 2019


    Jan 2020


    Full Time Salary

    1000

    1000

    1100

    1100

    1100

    1100

    1100

    Overtime

    100

    100

    100

    100

    100

    100

    100

    Accrued Vacation

    100

    100

    110

    110

    110

    110

    110

     

     

     

     

     

     

     

     

    Days of Service

    1795

    1826

    1857

    1887

    1918

    1948

    1979

    Years of Service

    4.92

    5.00

    5.09

    5.17

    5.25

    5.34

    5.42

    Retirement Contribution %

    5

    5

    6

    6

    6

    6

    6

     

     

     

     

     

     

     

     

    Retirement Contribution $

    60

    60

    78.6

    78.6

    78.6

    78.6

    78.6



    Tiers on Employee Attribute – Value in % Wages with Annual Cap

    This compensation basis works the same as the above but with an annual cap.

    Illustration of Use

    In the above example, assume that the annual cap for Employers Match of Retirement Plan has an annual limit of $200 per year. In this case, the above calculation would be as follows:


    Jul 2019


    Aug 2019


    Sep 2019


    Oct 2019


    Nov 2019


    Dec 2019


    Jan 2020


    Full-Time Salary

    1000

    1000

    1100

    1100

    1100

    1100

    1100

    Overtime

    100

    100

    100

    100

    100

    100

    100

    Accrued Vacation

    100

    100

    110

    110

    110

    110

    110

     

     

     

     

     

     

     

     

    Days of Service

    1795

    1826

    1857

    1887

    1918

    1948

    1979

    Years of Service

    4.92

    5.00

    5.09

    5.17

    5.25

    5.34

    5.42

    Retirement Contribution %

    5

    5

    6

    6

    6

    6

    6

     

     

     

     

     

     

     

     

    Retirement Contribution $

    60

    60

    78.6

    1.4

    0

    0

    0



    Tiers on Employee Attribute – Value in Hours Per Month

    This compensation basis works similar to the above but compensation value is specified in Hours per Month instead of % of Wages.

    So the following are the options you see on selecting this compensation item:

    • Value Criteria: Select whether the compensation basis is fixed or if it will change from year to year.
    • Employee Attributes: Select an employee attribute defined using the Workforce Attributes page. Refer to system-defined attributes here.

    Illustration of Use

    Compensation Item: Accrued Vacation

    Basis: Years of Service of the Employee

    • 0 < Employee Years of Service <= 5 Years : 10 Hours/Month
    • 5 < Employee Years of Service <= 10 Years : 12 Hours/Month
    • 10 < Employee Years of Service : 14 Hours/Month

    Employee: Jonas Williams

    Date of Hire: 1-Aug-2014

    (Notice that Years of Service for this employee crosses 5 in the September 2019 and Rate per Hour also changes in the same month.)  


    Jul 2019


    Aug 2019


    Sep 2019


    Oct 2019


    Nov 2019


    Dec 2019


    Jan 2020


    Full Time Salary

    1000

    1000

    1100

    1100

    1100

    1100

    1100

    Overtime

    100

    100

    100

    100

    100

    100

    100

    Accrued Vacation

    100

    100

    110

    110

    110

    110

    110

     

     

     

     

     

     

     

     

    Days of Service

    1795

    1826

    1857

    1887

    1918

    1948

    1979

    Years of Service

    4.92

    5.00

    5.09

    5.17

    5.25

    5.34

    5.42

    Vacation Hours/Month

    10

    10

    12

    12

    12

    12

    12

    Rate per Hour

    10

    10

    11

    11

    11

    11

    11

    Accrued Vacation $

    100

    100

    132

    132

    132

    132

    132


    Tiers on Employee Attribute – Value in Hours per Month with Varying Annual CapThis compensation basis has the following options:
    • Include Previous Year Annual Cap: Select to include the annual cap, rate, for the previous year in the calculation.
    • Employee Attributes: Select an employee attribute defined using the Workforce Attributes page. Refer to system-defined attributes here.
    • Annual Cap: Enter the annual cap amount for the current year.
    • Compensation Items for Calculating Total Wages: Select the compensation items from the Compensation Items drop-down to include that item in the total wages calculation, which adds up to gross pay.

    Tiers on Employee Attribute – Value in Hours per Month with Annual Cap

    This compensation basis works similar to the above but with an annual cap.


    So the following are the options you see on selecting this compensation item:

    • Value Criteria: Select whether the compensation basis is fixed or if it will change from year to year.
    • Employee Attributes: Select an employee attribute defined using the Workforce Attributes page. Refer to system-defined attributes here.
    • Annual Cap: Enter the annual cap amount for the current year.

    Illustration of Use

    Using the case above, place a $400 restriction on maximum accrued vacation cost per year.


    Jul 2019


    Aug 2019


    Sep 2019


    Oct 2019


    Nov 2019


    Dec 2019


    Jan 2020


    Full Time Salary

    1000

    1000

    1100

    1100

    1100

    1100

    1100

    Overtime

    100

    100

    100

    100

    100

    100

    100

    Accrued Vacation

    100

    100

    110

    110

    110

    110

    110

     

     

     

     

     

     

     

     

    Days of Service

    1795

    1826

    1857

    1887

    1918

    1948

    1979

    Years of Service

    4.92

    5.00

    5.09

    5.17

    5.25

    5.34

    5.42

    Vacation Hours/Month

    10

    10

    12

    12

    12

    12

    12

    Rate per Hour

    10

    10

    11

    11

    11

    11

    11

    Accrued Vacation $

    100

    100

    132

    68

    0

    0

    0



    Tiers on Employee Attribute – Value in Amount

    This compensation basis works similar to the above with one difference; the compensation amount is fixed.

    Illustration of Use

    Compensation Item: Car parking allowance

    Basis: Age of the employee

    (i.e. Aged employees need to have access to premium parking slots)

    • Employee Age <= 45 Years : $50/Month

    • 45 < Employee Age <= 60 Years : $75/Month

    • 60 < Employee Age : $150/Month

    Employee: Jonas Williams

    (Notice that Years of service for this employee age crosses 45 in Dec 19)


    Jul 2019


    Aug 2019


    Sep 2019


    Oct 2019


    Nov 2019


    Dec 2019


    Jan 2020


    Age in days

    16283

    16314

    16345

    16375

    16406

    16436

    16467

    44.61

    44.61

    44.69

    44.78

    44.86

    44.94

    45.03

    45.11

     

     

     

     

     

     

     

     

    Parking Allowance in $

    50

    50

    50

    50

    50

    75

    75



    Wage Type

    This compensation basis is used for calculating salary compensation items and includes the capability to provide mid-period salary review dates.

    The Wage Type calculation basis uses the following data to calculate employee compensation amounts in the Workforce Budget:

    • Employee hours per month
    • Current wage rate in $ / hour (wage rate at the time of Workforce Data upload)
    • Current year review - wage review date and review % (review date after budget setup date & before budget year start date)
    • Budget year review - wage review date and review % (review date between budget period start date and end date)

    Illustration of Use

    Wage-type calculation is typically used for calculating the budgeted salaries of employees. For example; full time Salary for an employee named Jonas Williams.

    • Employee : Jonas Williams
    • Date of Hire : 15-May-2010
    • Budget Setup Date: 1-Feb-2017
    • Budget Period : 1-July-2017 to 30-June-2018
    • Current Salary Rate as on 1-Feb-2017: $30/hour
    • Salary Review Current Year
    • Review Date: 15-May-2017
    • Review Percentage: 10% (i.e. $30x1.10 = $33/Hour effective from 15-May-2017)
    • Salary review during Budget Period:
    • Review Date: 15-May-2018
    • Review Percentage: 5% (i.e. $33x1.05=$34.65/Hour effective from 15-May-2018)



    Wage Type Without Reviews

    This compensation basis is used for calculating the base salary compensation item, but does not include the capability to provide mid-period salary review dates.

    • Employee hours per month
    • Wage rate in $ / hour

    Illustration of Use

    • Employee: William Magor
    • Employee Type: Intern
    • Wage Rate: $15 per hour
    • Number of hours per month: 20 hours



    Profit Sharing Setup Example with Multiple Caps And Different Percentages

    Lets say you need to setup an item or items in Workforce Planning that would calculate a different percentage of wages based on a salary threshold AND you need it to be delayed for the first two years of employment.

    Here are the details for profit sharing:

    • You want the employee to get 0% for the first 2 years of employment
    • After the first 2 years, the employee gets 5% of the first $118,000 of wages earned
    • For the wages earned above $118,000, the employee gets 10% up to a max of $256,000 in wages

    Example Solution

    1. Set up 3 compensation items as follows:

    Comp Item #1
    · % of Wages with Annual Cap
    · % = 5
    · Annual Cap = $5,900
    · Account = Stat #1
    · Wages = Appropriate Wage Items
    Comp Item #2
    · % of Wages with Annual Cap
    · % = 10
    · Annual Cap = $25,600
    · Account = Stat #2
    · Wages = Appropriate Wage Items
    Comp Item #3
    · % of Wages with Annual Cap
    · % = 10
    · Annual Cap = $11,800
    · Account = Stat #3
    · Wages = Appropriate Wage Items

    1. Next, address the employment length requirement. To do this, create 3 more comp items, which will reference the statistical account value posted from the first 3 comp items.

    Comp Item #4
    · Tiers on Employee Attribute - Value in % of Wages
    · Account = Profit Sharing GL Account
    · Attribute = Derived Years mentioned above
    · # tiers = 2
    · Tier 1 = From 0 To 2 = 0%
    · Tier 2 = From 2 To 99 = 100%
    · Wages = Comp Item #1 Stat Account
    Comp Item #5
    · Tiers on Employee Attribute - Value in % of Wages
    · Account = Profit Sharing GL Account
    · Attribute = Derived Years mentioned above
    · # tiers = 2
    · Tier 1 = From 0 To 2 = 0%
    · Tier 2 = From 2 To 99 = 100%
    · Wages = Comp Item #2 Stat Account
    Comp Item #6
    · Tiers on Employee Attribute - Value in % of Wages
    · Account = Profit Sharing GL Account
    · Attribute = Derived Years mentioned above
    · # tiers = 2
    · Tier 1 = From 0 To 2 = 0%
    · Tier 2 = From 2 To 99 = -100%
    · Wages = Comp Item #3 Stat Account

    This will post the proper net amounts.


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