The encumbrance program creates transactions in the financial system that calculate an employee's salary, plus employer-paid benefits and taxes over a certain period of time.
The amount of time used for each position and funding source is calculated using the funding end date, the appointment end date, the project end date, and/or the fiscal-year end date. The encumbrance process runs after each payroll cycle, and the resulting data is loaded from the Human Resources Management System (HRMS) into the financial system.
In general, the payroll encumbrance process involves two steps:
The calculation process pulls in all pertinent HR data for an employee to determine what the salary and benefit-related expenses will be for an employee through the end of the funding, project budget or fiscal year. The program uses current and future dated rows to perform the calculations.
The data used includes:
With the upgrade of the Finance System, payroll encumbrances are posted to the commitment control ledger through journal entries. With each payroll, Reversing Payroll Encumbrance Journals are created to relieve the encumbrance of the amount that is being paid. Then, Payroll Encumbrance Journals adjust the encumbrance to reflect job, funding, benefit or tax changes.
In addition, Payroll Encumbrance Journals are also made at the end of each week.
Salary is calculated based on active funding distributions. Depending on the appointment type and the SpeedType, the encumbrance will be calculated from the current month through the funding distribution end date, fiscal-year end date, or the account-project end date—as found in the Chart of Accounts.
The university has several encumbered benefits, including:
The amounts are calculated based on either a percentage of the gross pay or a fixed dollar amount per month. The encumbrance for benefits contributions will appear in the salary SpeedType; it will be charged to the department's salary account, unless a pooled SpeedType is assigned in the Funding Rules Table.
For more information, contact your campus budget office.
The university contributions for the Old Age, Survivors and Disability Insurance Program (OASDI) and Medicare tax are encumbered.
The amounts are calculated based on a percentage of the gross pay. The encumbrance for tax contributions will appear in the salary SpeedType, unless a pooled SpeedType is assigned in the Funding Rules Table.
For more information, contact your campus budget office.
1. Acquire Dates for Processing
The program reads the payroll calendar table for the next unconfirmed (not processed) monthly payroll. This could be the current month, if the date the program is run is before the payroll processing for the month. Otherwise, it would be the beginning of the next month.The accounting period used is determined by the date the process is being run. The encumbrances are always entered into the current accounting period. No encumbrances are created in future accounting periods.
2. Selection of Employee Jobs and Benefits
Jobs are selected from the job table based on the following criteria:
Next, future-dated jobs are selected to see if there are any upcoming changes that would impact the encumbrance calculation. The same basic selection is used to find job rows, only this time the program is looking for rows with an effective date greater than or equal to the current date. This routine also looks for a contract with an effective date less than or equal to the effective date of the future dated job. If the future row is a new job (or rehire), or if the appointment end date is different, the future job is loaded into the table with the current jobs. (Appointment end date for the previous job row is updated so the length of jobs will not overlap and be twice encumbered.) Benefit enrollment information is selected for each employee who has a non-taxable (employer-paid) deduction. This includes medical, dental, basic life, short-term disability (classified staff only), long-term disability (faculty and exempt professionals only) and retirement (PERA or CU 401(a) Retirement Plan). Tax information is also collected for employees who are subject to FICA and/or MEDITAX. Employees with job codes beginning with 32xx (stipend and fellowship employees), or who have job code 3110, are not processed for tax encumbrances.
3. Create Encumbrances
A. Get funding information for each position
The speedtype, distribution percentages and funding begin/end dates for each position are retrieved from the Department Budget Table (created by bud013cu). If no funding is found on this table, the encumbrances will be made to the suspense account. Routines are used to determine the account and suspense chartfields, as they do in the actual payroll distribution process. If the fund type is general and if the benefits are pooled, then the encumbrances are booked to the pooled accounts, instead of to the departmental accounts.
B. Determine length of calculation
If the fund is not equal to 30 or 31, then the encumbrance will be calculated to the earliest of the following dates:
If the fund is equal to 30 or 31, then the encumbrance will be calculated to the earliest of the following dates:
C. Salary encumbrances
Each job selected where the employee is not on Leave of Absence or Short Work Break and where the compensation rate is not equal to zero is processed.The encumbrance amount is calculated based on the monthly amount, times the number of remaining months or for a biweekly salaried employee—the biweekly amount, times pays periods remaining in the period.
D. Benefit and Tax Encumbrances
Flat-dollar benefits (medical, dental, basic life and long-term disability) are calculated using the amount of the benefit listed in the system table, multiplied by the number of remaining months. Percentage benefits (short term disability and retirement) and taxes (FICA and Medicare) are calculated using the percentage listed in the system table multiplied by the amount encumbered for earnings. Fringe-rate encumbrances are calculated based on the pool factor from the allocation table (in the Finance System) and multiplied by the earnings encumbrance amount. (For Boulder employees only.)
The new amounts that have been calculated for employee salary, and employer-paid benefits and taxes are then updated to encumbrance tables in the financial database. These amounts are stored based on the SpeedType and account ChartField combinations. This information can then be viewed on various financial reports.
4. Outstanding Issues
The payroll encumbrance process does not currently consider the following types of limits and future activity. If you have significant types of these transactions, you should adjust your encumbrance accordingly. We are looking at mechanisms to see if the process can accommodate these types of transactions.
Any questions about the payroll encumbrance process should be directed to the appropriate campus controller, who will consult with Employee Services and the university controller as necessary.