To understand the basic premise of how the encumbrance works, the following items need to be considered:

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1 University of Missouri System Overview of Payroll Encumbrances As of July 1, /3/2003 The payroll encumbrance process is an automated process that is initiated by the UM System Controller s office at the end of each month. This process does not run as part of PeopleSoft HR/Payroll, nor is it part of the PeopleSoft General Ledger. This program has been designed by the University to specifically meet the needs of the University. To understand the basic premise of how the encumbrance works, the following items need to be considered: The encumbrance process is only run once a month, at the end of the month. The encumbrance process does not get updated after each bi-weekly payroll. As the encumbrance process is not a function of PeopleSoft, the payment of payroll checks does not directly affect the encumbrance balance. The existence of a payroll encumbrance on a chartfield does not trigger the payroll system to cut a check to an employee. The encumbrance is only an estimate. The encumbrance is based on information stored in the HR/Payroll system; therefore, the accuracy of the encumbrance is contingent on the accuracy of the PAF/payroll data. Encumbrances are not recorded for Retirees, LTD s employees and for Hospital account codes. Encumbrances are not recorded for those with Earn Codes of CMB, UNI, or UNE. Encumbrances are only recorded for employees with an Employee Status of A or P. Encumbrance of Gross Payroll Charges The encumbrance for gross payroll charges is calculated and recorded on monthly and bi-weekly pay, contract pay, and certain types of additional pays. The encumbrance program calculates the charges based on the account code(s) on the effective dated JED and or additional pay panels. The specifications in the program are as follows: When JED contains a ProjectID and fund is NOT between or , encumber thru the lesser of: APPOINT_END_DT on table PS_EMP or Effective dated rows on JED or Project End date less 120 days or Fiscal Year End When JED contains a ProjectID and fund is between or , encumber thru the lessor of: APPOINT_END_DT on table PS_EMP or 1

2 Effective dated rows on JED or Project End date less 120 days 9/3/2003 When JED does NOT contain a ProjectID, encumber thru the lessor of: APPOINT_END_DT on table PS_EMP or Effective dated rows on JED or Fiscal Year End Additional specifications for additional pay are as follows: For employees with certain additional pay entries from HR, the encumbrance is calculated and entered for the corresponding ChartFields for account codes on additional pay panel. The encumbrance is thru the lesser of: additional pay end date APPOINT_END_DT on table PS_EMP fiscal year end date project end date less 120 days if apply The encumbrance amount is the lessor of remaining balance calculated from the additional pay panel (Goal_amt - goal_balance) and the additional pay amount times the number of pay period remaining in the system based on the encumbrance end date. Additional specifications for contract pay are as follows: For employees with contract pay, use the contract begin and end date from the contract table. Use the ChartFields from JED to spread the amount. The encumbrance is thru the lesser of: contract end date APPOINT_END_DT on table PS_EMP fiscal year end date project end date less 120 days if apply Multiply the earnings amount by the number of months from the encumber begin date to the end of the appropriate time period Additional specifications for bi-weekly pay are as follows: Select the annual pay amount, divide by 12 months and then by the number of days in the month to get a daily rate for biweekly. Multiply the monthly rate by the appropriate number of whole months described previously (lesser of project, contract, fiscal year, or termination date). Multiply the daily rate by the number of days remaining in the month from the most recent pay end date. Use the pay end date of the latest confirmed biweekly type of pay runid, do not use offcycle data for any encumbrance calculation. For bi-weekly pay encumbrances, the daily rate used for the calculation will change each month. The daily rate will depend on the number of days in the month that still has payroll to be paid. For example if the last pay date was on July 31 st, but it was for time worked through July 20 th, then there are still 11 days in the month of July that would need to be encumbered. Therefore, to recalculate the encumbrance you would need to obtain the daily rate of pay based on 31 days in the month of July, this rate would be taken times the 11 days remaining in the month. This amount would be added to the full months of pay that are also being encumbered. 2

3 The encumbrance begin date is inclusive and the end date is exclusive when calculating the encumbrance amount. Examples of each of the types of encumbrances will be given below. Encumbrance of Payroll Benefit Charges The payroll benefit charges associated with an individual s gross payroll are also recorded as an encumbrance. The benefit charge encumbrance is calculated based on the payroll encumbrance charge times the following benefit rates for each business unit: Business Unit Flat-Rate Benefit Percentage FICA Rate Combined Rate COLUM 20.00% 7.65% 27.65% KCITY 20.00% 7.65% 27.65% ROLLA 20.00% 7.65% 27.65% STLOU 20.00% 7.65% 27.65% UOEXT 23.48% 7.65% 31.13% UMSYS 20.00% 7.65% 27.65% UWIDE 20.00% 7.65% 27.65% The employee s Regular/Temporary status and FICA status affects the amount of benefits encumbered. Calculations are based on the combinations below: If employee has Regular/Temporary status = R and FICA status = N Calculate benefits using both FICA and flat rate benefits percentage If employee has Regular/Temporary status = R and FICA status = E Calculate benefits using only flat rate benefits percentage If employee has Regular/Temporary status = T and FICA status = N Calculate benefits using only FICA percentage If employee has Regular/Temporary status = T and FICA status = E Calculate no benefits If employee has Regular/Temporary status = R and FICA status = M Calculate benefits using only FICA Medicare and flat rate benefits percentage If employee has Regular/Temporary status = T and FICA status = M Calculate benefits using only FICA Medicare 3

4 Payroll Encumbrance Examples 1) Monthly Employee, employed as of July 1, with an annual salary of $50,000. One source of funding per the JED (not split funded) 100% Chartfield A No future dated effective rows on the JED Monthly Salary Rate = $45, Encumbrance as of July 31, 2003 = $45, on Chartfield A 2) Monthly Employee, employed as of July 1, with an annual salary of $50,000. Chartfield C No future dated effective rows on the JED Number of months remaining in the fiscal year for Chartfield C = 11 months Funding percentage of 25% = $11, on Chartfield C 4

5 3) Monthly Employee, employed as of July 1, with an annual salary of $50,000. 9/3/2003 Chartfield C Future effective dated row on JED where funding under Chartfield C stops as of December 31, 2003 Number of months remaining in the fiscal year for Chartfield C = 5 months Monthly Salary Rate = $20,833.35; Funding percentage of 25% = $5, on Chartfield C 4) Monthly Employee, employed as of July 1, with an annual salary of $50,000. chartfield C Grant funded on Chartfield C; ProjectID has an end date of December 31, No future effective dated rows on JED. 5

6 Number of months remaining based on the project date for Chartfield C = 17 months, less the additional 120 days added on to the project date = 13 months, however, only encumber through end of the fiscal year = 11 months Monthly Salary Rate = $45, Funding percentage of 25% = $11, on Chartfield C 5) Monthly Employee, employed as of July 1, with an annual salary of $50,000. Chartfield C Grant funded on Chartfield C; ProjectID has an end date of May 31, 2004 (the true project end date is January 31, 2004, 120 days before the ProjectID end date). Future effective dated row on JED for Chartfield D which contains a Project ID that starts on February 1, 2004 and has an end date of December 31, 2005 Number of months remaining based on the project date for Chartfield C = 10 months, less the additional 120 days added on to the project date = 6 months Monthly Salary Rate = $25, Funding percentage of 25% = $6, on Chartfield C Number of months remaining based on the project date for Chartfield D = 23 months, less the additional 120 days added on to the project date = 19 months, but only encumber through fiscal year end, so February June 2004 = 5 months Monthly Salary Rate = $20, Funding percentage of 25% = $5, on Chartfield D 6

7 6) Bi-weekly Employee, employed as of July 1, with an hourly rate of $ One source of funding per the JED (not split funded) 100% Chartfield A No future dated effective rows on the JED Last pay period ended August 17, 2002, was paid on August 28, 2002 Annual Salary Divided by 12 = ($10.00 x 2080)/12 = $1, monthly Number of full months remaining in the fiscal year for Chartfield A = 10 months Equals (=) $17, Plus (+) days remaining to be encumbered for the month of August Monthly Payroll ($1,733.33), divided by the total number of days in August (31) = $55.91 daily rate Number of days unpaid in August = 14 (August 18 th 31 st ) Equals (=) $ encumbrance for remaining days in August Total Encumbrance of $17, plus (+) $ = $18, on Chartfield A 7) Contract Pay Faculty, annual salary of $60,000 One source of funding per the JED (not split Funded) 100% Chartfield A Contracts starts on September 1, 2003 and ends on May 31, 2004 No future effective dated rows Annual Salary Divided by 9 months of pay = $6,666,67 monthly; At September 30, 2003, number of months remaining on contract for Chartfield A = 8 months Monthly Salary Rate = $53,333.36; Funding percentage of 100% = $53, on Chartfield A NOTE: For contact pay employees, the election to be paid 9 over 12 vs. 9 over 9 does not affect the encumbrance process. The encumbrance result would be the same. 7