This tutorial deals with Fusion Payroll, and how it functions. In this part, we will discuss about Proration and Retroactive Pay in Payroll.

Proration and Retroactive Pay

Proration is the mechanism used to calculate the proportionate earnings and deduction amounts whenever appropriate data that is relevant to payroll changes during a payroll period in which the payroll is calculated.

Retroactive pay processing ensures that your payroll run for the current period reflects any backdated payments and deductions from previous payroll periods.

To assist these types of payroll processing, there exist groups called event groups. Event Groups are those that define the types of data changes that trigger retroactive event notifications or prorated calculation of a person’s earnings or deductions.

There are two types of event groups:

• Event Group for proration - predefined group Entry Changes for Proration .

• Event Group for retroactive pay processing - predefined group Entry Changes for Retro .

If the predefined event groups do not satisfy your requirements, you can either modify the already existing predefined groups or create a new event group.

The task associated with it is Manage Event Groups.

Proration

Proration calculates the proportionate amounts for recurring elements when payroll-relevant data changes during a particular payroll period.

If there is any proration information available from event groups, then the Payroll creates two payroll run results:

• one for the payroll period up to the day before the event, and

• one from the date of the event to the end of the period.

In order to use proration for payroll processing, the following setting is to be undergone:

1. Review the predefined proration event group (Optional : Update the event group or create a new event group, depending upon your requirements). The task associated with this is Manage Event Groups .

2. Enable proration processing for an element (during the creation of the element).

The “event” that will trigger the prorated calculation of the payroll can be anything from a change in the location of the payroll to a change in the payroll calculation card of the employee. Hence, depending upon your requirements and needs, you can use the predefined event groups as they are, modify them accordingly, or create a new event group altogether for your needs.

Retroactive Pay Processing

Retroactive processing is the recalculation of prior payroll results due to certain changes that have occurred after the original calculation was run. These change events are specified in the retroactive event groups.

In order to use retroactive pay processing, the following setting is to be undergone:

1. Review the predefined retroactive event group (Optional: Update the event group or create a new event group, depending upon your requirements). The task associated with this is Manage Event Groups .

2. Enable retroactive processing for an element (during the creation of the element).

To review already existing retroactive events or create a new one, the task associated is Manage Event Notifications.

Once the events have been defined in the event groups, they have to be verified for any changes that occur in them. This is done by submitting the Recalculate Payroll for Retroactive Changes process. This will create run results and entries required for further processing. Therefore, if an element is enabled for retroactive processing, an entry will be generated for the retro element. This will be used for the next payroll run period for retroactive calculation.

For example, if the input value changes, and that particular input value is specified under a retroactive event group, the change in that input value will trigger the event notification. This information will be utilised by the retroactive calculation, which will then cause the retroactive pay processing to occur for the payroll run.

After the event groups have all been defined and the event notifications have been triggered, the Calculate Payroll process has to be run for the retroactive processing to take place for the payroll calculation.

Fig. 1 - Retroactive Setup for event groups and calculation

Fig. 2 - An example of retroactive pay processing

An important step to be kept in mind while creating an element is the enabling of proration and/or retroactive processing. This can be done during the creation of the element, on the Additional Details page.

You will see in the screenshot below that, under the section Special Rules, there are radio buttons available for enabling proration and retroactive processing. There are also dropdowns from which the respective Proration Group and Retro Group (event groups) are to be selected for the element.

Once this element is created, the retro element will be created automatically and attached with the retro components.

Fig. 3 - Enabling proration and retroactive processing during the creation of an element under ‘Special Rules’

Krishnaa Lakshmanan

Add comment