Payroll Encumbrance

The payroll encumbrance process is designed to create encumbrance transactions for salaries and employer contributions in the encumbrance database and subsequently update the general ledger.

Encumbrances are essentially commitments to spend allocated budget resources. Payroll encumbrances are commitments related to your expected payroll expenses.

Available funds for any given GL account can be calculated as follows:
AVAILABLE FUNDS = BUDGET – ACTUAL EXPENSES – ENCUMBERED AMOUNTS

The payroll encumbrance process increases the encumbered amounts for salaries and contributions therefore reducing available funds for that account. After conducting payroll, actual expenses increase as a result of that payment. We then disencumber that pay period to reduce the encumbered amount, to avoid overstating the amount of money we expect to spend (encumbrances) for the remainder of the fiscal year.

For additional information, see Payroll Encumbrance process.