Scheduling employee earnings to take effect at a future date

This article explains the process of adding a new pay rate to an employee's record and setting the date for when the new rate will apply in the future. Depending on the employee's timesheet/pay settings, the system will automatically apply the new rate in the pay run.

The main topics discussed in this article include:

• Adding future earnings;
• Editing/deleting future earnings;
• How are scheduled future earnings applied in the first affected pay run?;
• At what rate is leave paid at when scheduled future earnings are applied in the first affected pay run?

Adding future earnings

To add a new future rate against an employee, navigate to the employee's Pay Run Defaults screen. Located to the right of the employee's existing pay rate details, click on the "Apply from a specified date" button:

A modal will appear where you can then add the new pay rate and commencement date: 

N.B. The 'Pay Rate' field will be pre-populated with the rate the employee is currently being paid. You can override this value by entering the new future rate. 

The commencement date entered must be a date in the future, ie it cannot be a date on or earlier than the day you are scheduling the new rate. Also, you will be prevented from entering a commencement date:

• that is within a pay period of a created pay run, whether the pay run is finalised or unfinalised. You will see the following warning if this occurs:

In this instance you can exclude the employee from the unfinalised pay run, create the future pay record and then include the employee back in the pay run.

• if that date is already scheduled for a future pay rate adjustment. You will see the following warning if this occurs:

  

For any employee that has recorded rate changes, the following link will appear within the employee's 'pay rate' details which will open up a context panel with all the details. This is also where you need to go to edit/delete any scheduled rate changes:

You can schedule multiple future earnings for an employee so long as the commencement date for each record is not identical.

Future pay details will remain as a record (as per the above future rate adjustments screenshot) up until the day of the future earnings commencement date. This will be the case regardless of whether a pay run has been created for a pay period that encompasses the future earnings commencement date. 

On the date of the future earnings commencement date, the amount displayed in the employee's 'Pay Rate' field will update in accordance with the future earnings record and the pay rate adjustments record will be removed from the Pay Run Defaults screen.

An audit trail of the initial record created and the subsequent update to the employee's 'Pay Rate' field can be viewed via the Employee Details Audit Report. An example of the transactions recorded in this report are as follows:

Using the above example, the transactions will detail the following movements:

• On 28 July 2020, a user added a future pay rate of RM6,000 per month to commence from 5 August 2020.
• On 5 August 2020, the system automatically updated the employee's 'Pay Rate' field (in the Pay Run Defaults screen) from RM5,000 per month to RM6,000 per month
• On 5 August 2020, the system automatically updated the pay rate assigned to the employee's primary pay category 'Permanent - Daily' (in the Pay Rates screen) from RM5,000 per month to RM6,000 per month.

Interaction between future earnings and linked pay categories

Some employees will be assigned a primary pay category that has linked pay categories. If such employee has a scheduled rate adjustment to be applied in the future, the rates attached to the linked pay categories will also update automatically. The new linked pay category rates will be calculated by using the new scheduled rate as the base rate and then applying the penalty loading percentage assigned to each linked pay category. 

Using the example below, the employee's primary pay category is 'Permanent - Ordinary Hours'. A  scheduled rate change is due on 29/8/20 where the employee's base rate will change from RM25.00 per hour to RM28.50 per hour. Because there are linked pay categories, the system has also calculated the rates of pay that will apply from 29/8/20 for those linked categories: 

Editing or deleting future earnings

If an employee has an existing future rate adjustment recorded against their record, you can edit or delete this record easily. Looking at the example screenshot below:

• the pencil icon allows you to edit the record and update the commencement date and/or pay rate amount.
• the bin icon allows you to completely delete the record.

How are scheduled future earnings applied in the first affected pay run?

This depends on how the employee is set up to be paid (via their Pay Run Defaults screen).

The following scenarios will trigger an automatic application of the new rate in the pay run: 

• Employees submit timesheets for hours worked: Because timesheets are date based, the system will refer to the timesheet dates and know when to use the employee's current rate and then the new rate, regardless of whether the new rate commences mid pay period.

• Employees paid standard hours by default in a pay run: Also known as auto-pay employees, this applies to employees who have the setting "Pay these earnings by default in a pay run" ticked in their Pay Run Defaults screen. If the new pay rate takes effect from the start of the pay period then all default hours paid will automatically apply the new pay rate. If the new pay rate takes effect mid pay period, and using the example of a monthly pay period 01/07/20 to 31/07/20 where an employee is paid a fixed monthly rate and their new fixed monthly rate commences on 28/7/20, the following formula is applied to split the salary between the current pay rate and new pay rate:

         number of days new pay rate applies in pay run (this includes all week days and weekends) / total number of days in pay run; 4 days / 31 days = 0.12903

• The employee will be paid 0.87097 units at the current rate and 0.12903 units at the new rate, as follows:                                                                                                                                                         
  
  
  The allocation of current rate vs new rate in the pay run can always be overridden by updating the number of units against each earnings line.

• Employees paid advanced work hours by default in a pay run: The difference between this scenario and the one above is that these employees have advanced work hours configured in their Pay Run Defaults screen, as follows:             
                                                                                   
  
  Because advanced hours are date based, the system will refer to the dates of each work day and know when to use the employee's current rate or the new rate, regardless of whether the new rate commences mid pay period.

• New pay rate takes effect from the pay period start date: Regardless of how the employee's pay run default settings are configured and/or if the employee is paid manually (ie by using the 'Actions' > 'Add Earnings' function in the pay run) the new pay rate will be applied automatically to the earnings if the new rate commences from the start of the pay period.

Where employees are configured to either:

• use timesheets to submit all time worked
• be paid standard work hours by default
• be paid advanced work hours by default,

a warning will appear in the pay run if any such employees have a scheduled rate change in that pay run, indicating that the system has applied the new rate automatically.

The following scenarios will NOT trigger an automatic application of the new rate in the pay run, where the new rate commences mid pay period: 

• Employees whose earnings are processed manually in the pay run: This includes employees who are not paid via timesheets or do have the setting "Pay these earnings by default in a pay run" ticked in their Pay Run Defaults screen. Rather, these employees' earnings are processed in the pay run using the 'Actions' > 'Add Earnings' function. Because these earnings have no date associated to them, the system cannot make assumptions about what portion of hours should be paid at the current rate and the new rate. As such, the earnings will default to the current rate. A warning will appear in the pay run if such a scenario applies.
• Manually applying earnings to a pay run: Regardless of how the employee's pay run default settings are configured and/or if the employee is paid using timesheets or by default, if manual earnings are added to an employee's pay (ie by using the 'Actions' > 'Add Earnings' function in the pay run) the current rate will be applied. As per above, this is because the earnings have no date associated to them so the system cannot make assumptions about what portion of hours should be paid at the current rate and the new rate. In this instance, the new rate will need to be manually applied as appropriate.
• Importing pay run earnings: When adding earnings to the pay run using the import function, the pay rate associated to the pay category must be added in order to import the data. Once imported, the pay rate added to the import will be what is applied in the pay run. To clarify, the system will not override the entered rate with the new rate. This rule applies regardless of how the employee's pay run default settings are configured and/or if the employee is paid using timesheets or by default. As such, the new rate will need to be manually applied as appropriate. 

At what rate is leave paid at when scheduled future earnings are applied in the first affected pay run?

This depends on the leave category payment setup and, also, how leave is applied in the pay run.

Let's discuss leave category payment setup first. The following payment setups are available when setting up a leave category:

If a leave category's payment setup = Basic, leave will not be reported against a separate pay category. So how an employee is paid for their leave depends on their Pay Run Defaults settings. Rather, the rules around how future earnings are applied in the pay run will apply.

For the other leave category payment setup options, the rate leave is paid at depends more on how the leave is applied in the pay run, which is discussed below.

The following scenarios will trigger an automatic application of the new rate, as appropriate, to leave applied in the pay run: 

• Applying a leave request: Where a leave request is applied (or bulk applied) in a pay run, the system will refer to the leave dates and thereby know when to use the employee's current rate and/or new rate, regardless of whether the new rate commences mid pay period. With regards to any unpaid leave taken, and specifically when an employee's earnings reduce by the amount of leave taken, the rate at which the leave hours are deducted will be automatic and depend on the leave dates. If unpaid leave is taken on or after the date the new rate commenced then it will be deducted at the new rate. 

• Leave based timesheets: Where leave is submitted via a timesheet and the timesheet is applied in the pay run, the system will refer to the timesheet dates and thereby know when to use the employee's current rate and/or new rate, regardless of whether the new rate commences mid pay period.  

• New pay rate takes effect from the pay period start date: Where leave is applied manually (ie by using the 'Actions' > 'Take Leave' function in the pay run) the new pay rate will be applied automatically to the leave earnings because the new rate commences at the start of the pay period. With regards to any unpaid leave taken, and specifically when an employee's earnings reduce by the amount of leave taken, the new rate will be used to deduct the earnings. If the leave that is being manually applied (whether paid or unpaid) applies to a date prior to the commencement date of the new rate, you will need to manually adjust the rate at which leave is being processed. 

The following scenario will NOT trigger an automatic application of the new rate, as appropriate, to leave applied in the pay run: 

• Leave applied manually where the new rate commences mid pay period: Regardless of how the employee's pay run default settings are configured and/or if the employee is paid using timesheets or by default, if leave is applied manually (ie by using the 'Actions' > 'Take Leave' function in the pay run) the current rate will be applied to the leave hours. This is because the earnings have no date associated to them so the system cannot make assumptions about what portion of leave hours should be paid at the current rate and the new rate. With regards to any unpaid leave taken, and specifically when an employee's earnings reduce by the amount of leave taken, the current rate will be used to deduct the earnings. If the leave that is being manually applied (whether paid or unpaid) relates to a date on or after the commencement date of the new rate, you will need to manually adjust the rate at which leave is being processed. 

How are future earnings applied to shifts/leave spanning midnight? 

Where an employee:

• works a shift that spans past midnight, or
• takes leave and such leave hours span past midnight, and
• the commencement date of the new rate takes effect from the day spanning past midnight, 

the system will continue to apply the current rate from midnight until the shift/leave ends. The new rate will be applied from the first shift worked (or leave day) that starts on the commencement day.

Special conditions for employees assigned to a pay rate template

Firstly, to confirm, a future earnings record can be created for an employee assigned to a pay rate template. When a future earnings record is created and the commencement date kicks in, the employee's 'Pay Rate' field will update accordingly with the new rate. The extra event that will occur in this instance is that the "Override pay rate" checkbox (in the employee's Pay Run Defaults screen) will be ticked. This mirrors the existing process of having to tick the "Override pay rate" checkbox when wanting to enter a different pay rate for an employee to that associated with the pay rate template. To clarify:

• the pay rate of an employee assigned to a pay rate template will automatically be that set up in the pay rate template and the 'Pay Rate' field is locked.
• To override the pay rate associated to the template, you have to tick the "Override pay rate" checkbox where you can then enter the tailored rate for the employee.

When adding a future pay rate for an employee, you are not required to tick the "Override pay rate" checkbox because at this stage you are not overriding the existing employee's pay rate. Rather, you are creating a record that, on a future commencement date, will then update the employee's pay rate. When the commencement date falls, the system will update the rate in the employee's 'Pay Rate' field. Additionally, if the employee has a pay rate template assigned in their settings on the future rate commencement date, the pay rate template will still apply. The system though will automatically tick the "Override pay rate" checkbox to allow the new rate to be saved.

What happens when a pay rate template is updated? 

We apply the same rules in this scenario as we currently do when a pay rate template is updated. To clarify, the rules are as follows:

• When the rates within a pay rate template are updated and employees are linked to the pay rate template, you are asked whether you want to apply the rate updates to the linked employee(s):       

• If you choose to "update employees", any employee with an overridden pay rate that is linked to the pay rate template will be automatically excluded from being updated. In this instance, it is the responsibility of the business to cross check the pay rate contained in the employee's 'Pay Rate' field against the updated pay rate entered in the pay rate template. 
• If you want to apply the rate associated to the pay rate template for an employee instead of the overridden rate you need to untick the "Override pay rate" checkbox in the employee's Pay Run Defaults screen and click on "Save". This will revert the employee's pay rate to the one associated with the pay rate template. 

Other notable mentions

• Timesheet costs will be updated to reflect any future earnings from the commencement date.
• Roster costs will be updated to reflect any future earnings from the commencement date.
• If generating a Leave Liability report for a date in the future and future earnings are scheduled to commence on or before the 'as at' date, the leave value will reflect the future earnings accordingly.
• The Employee Details Report includes a new display column called 'Future Earnings'. This will report on any future earnings recorded with a future commencement date and the actual date the new rate will apply from. To clarify, historic records (ie records where the commencement date is prior to the date the report is generated) will not appear in the report as they are no longer deemed future earnings.

If you have any questions or feedback, please let us know via support@yourpayroll.io.