Payroll Commitment Accounting Overview
The Payroll Commitment Accounting initiative launched in early 2023 to enhance Brown University’s ability to project payroll expenses in real time and inclusive of changes to positions and costing allocations that occur throughout a fiscal year in Workday. Payroll Commitment Accounting is a critical tool for both university leadership as well as decentralized departments charged with forecasting spend in alignment with their budgets and in managing fiscal resources. Additionally, over time, the automation of Payroll Commitment Accounting will limit the need for manual projections.
Payroll Commitment Accounting is the process in Workday that encumbers base salary across all funding sources for staff, faculty, postdocs and supported graduate students for the fiscal year to forecast payroll spend for both filled and unfilled positions.
Commitments are generated for unfilled positions and obligations are generated for filled positions in this process. Both obligations and commitments can be used in conjunction with position budgets and actuals to provide a full, predictive forecast of actual spend at the end of the fiscal year as early as the first quarter of the fiscal year.
Project Background
Cross functional team members from Accounting, Office of Sponsored Projects, Office of Financial Strategy and Planning, Payroll, University Human Resources and Workday Program have been collaborating to support the implementation of the project, In July 2024, Payroll Commitment Accounting will go live and allow central office as well as departments to project payroll accounting spend throughout the fiscal year for the positions they support.
How Will This Impact Me
University leadership and department staff with access to financial reporting and charged with managing financials for their organizations will have access to Payroll Commitment Accounting in Workday. Payroll Commitment Accounting will be primarily accessed through Workday financial reporting to support forecasting in their organizations and to inform financial decision-making. More information about available financial reporting will be available in the coming weeks.
The following are key terms to help define how payroll commitment accounting is supported:
Payroll Encumbrance: Projected accounting based on current position information
Payroll Obligations: Payroll encumbrances generate for filled positions and are updated when position changes occur. Payroll obligations will be generated in the obligations ledger.
Payroll Commitments: Payroll encumbrances generated for unfilled positions and will be liquidated when the position is filled. Payroll commitments will be generated in the commitments ledger.
Base Year: The initial fiscal year of the commitment/obligation period is called the Base Year. In the base year, commitment obligations are created for all financial worktags. The base year will change consistent with the current fiscal year. For example, when the fiscal year is FY25, the base year is also FY25. Additional fiscal years of the commitment/obligation period are strictly for the Grant worktag.
Period Schedule: The period schedules are set based on Brown’s pay periods and payroll schedule. Period schedules are set well into the future to accommodate additional fiscal years of data and are updated annually.
Payroll Actuals: Payroll accounting that is recorded when salary is paid. Actuals only occur in periods when the pay period is closed and finalized.
Payroll Commitment Rules: The payroll commitment rules are used to determine the pay components that will commit and obligate. Only base pay components will be calculated. This does not include time off, overtime, shift differentials, bonuses or undergraduate student wages.
Active, Filled Positions: all active, filled positions staff, faculty, postdoc and graduate students that have a base compensation plan will be assessed for a payroll obligation. Workday assumes that an active, filled position will remain that way for the entire Base Year; therefore, it is important to ensure the costing allocations are in place for the entire Base Year or an end date for the position and/or compensation plan should be added.
Filled positions without a costing allocation will have obligations generated based on the default organization assignments for the position.
Unfilled Positions with Requisitions: Unfilled positions with requisitions will generate a payroll commitment based on the target hire date of the requisition. Default worktags associated with the organization assignments will be used as charging instructions to generate the commitment. A costing allocation can be associated with the position restriction for a position with an active requisition to encumber additional worktags beyond cost center, business unit, fund and expense purpose code.
Adjustments: Changes to positions including compensation changes, terminations, new hires, pay cycle updates, costing allocation changes and position end dates impact the payroll commitment process. In order to address position changes, the commitment adjustment process will be run daily Monday-Friday, and reflected in reporting.
Obligation Liquidations: Obligations liquidate from the worktags present in the costing allocation on the payroll payment date. If the ledger account varies after the creation of initial obligations, there could be a mismatch. Liquidations use the most current account posting rules, while the obligations will use the posting rules applicable at the time of the obligation creation.