Payroll Contracts
In the Payroll system, a contract is defined as a collection of pay assignments that are grouped together by a common Contract ID. A single contract for an employee may be comprised of one or many pay assignments. Each employee may have one or more contracts in effect at any given time. Each pay assignment will have a begin/end date range. The Contract Begin/End dates are defined by the earliest begin date and the latest end date among all the pay assignments belonging to that contract. Each pay string or pay line that belongs to a given Contract ID will have transactions recorded against it through the course of the contract. The progress of the overall contract is simply the summary of all transactions for all pay lines associated with the contract.
Contract ID
Contract amounts will be tracked (accumulated) under a Contract ID. The Contract ID is a combination of one or more pay string parts chosen by the client to uniquely represent contracts in the system. The client selects which parts, and in which order they appear to set up this Contract ID format. The format is specified in Common Code PYFG/CNTRCTID. Any of the pay string parts may be used, though clients typically set up user-defined pay string parts to represent contracts. A simple example for a three-part Contract ID might be:
- Position
- Contract year
- Sequence number to distinguish multiple contracts for a single year
Because pay strings are attached to every pay assignment and every transaction in the payroll system, it follows that a Contract ID is also attached to all pay assignments and to all timecard and history transactions for each contract. Once the Contract ID is defined in the common code, the system will be able to analyze the pay strings and accumulate amounts accordingly.
Deferred Pay
Within BusinessPlus Payroll, the issue that sets Contract Processing apart from other payroll processing is the concept of deferred pay. A contract may be paid out over a period of time that differs from the time-frame in which the pay is earned. Teachers, for example, may be contracted to work (earn) over a 10-month period but are paid out in equal salary installments over a full 12-month period. A portion of earnings during the work months is "deferred" to be paid during non-working months. It is the separate tracking of earnings vs. pay that is at the heart of Contract Processing in BusinessPlus Payroll. Unless deferred pay is used, Payroll Contract Processing should probably not be used. There are simpler methods for tracking Payroll transactions if deferred pay is not involved.
Example
Period | Earnings | Pay | Deferred Pay | Escrow Balance |
|---|---|---|---|---|
1 | $1,200 | $1,000 | $200 | $200 |
2 | $1,200 | $1,000 | $200 | $400 |
3 | $1,200 | $1,000 | $200 | $600 |
4 | $1,200 | $1,000 | $200 | $800 |
5 | $1,200 | $1,000 | $200 | $1,000 |
6 | $1,200 | $1,000 | $200 | $1,200 |
7 | $1,200 | $1,000 | $200 | $1,400 |
8 | $1,200 | $1,000 | $200 | $1,600 |
9 | $1,200 | $1,000 | $200 | $1,800 |
10 | $1,200 | $1,000 | $200 | $2,000 |
11 | $0 | $1,000 | ($1,000) | $1,000 |
12 | $0 | $1,000 | ($1,000) | $0 |
Totals | $12,000 | $12,000 | $0 | $0 |
Escrow Balance
The term "escrow balance" is used to represent the difference between what an employee has earned and has been paid during the course of the contract. The escrow balance for a given contract may be positive or negative at any specific point in the contract. A positive escrow balance represents excess earnings for which the employee has not yet been paid. If the escrow balance is negative, the employee has been paid more than what has been earned and owes the employer an amount of future work (earnings). Ideally, at the end of a contract, the salary paid out will equal the amount earned and the escrow balance will be zero. If a contract should for any reason terminate early, the escrow balance needs to be accounted for. For any positive escrow balance, an employee would be paid that balance. A negative escrow balance represents overpayment that should be collected from the employee.