Policy
FIACCT 17-00_00 Labor Distribution – Overview
Effective: July 1, 1994
Revised: June 1, 2009
Reviewed: June 1, 2009
Purpose
This policy provides the information needed for an overall understanding of labor distribution.
Policy
The Division of Finance will maintain the time distribution and mandatory pool components in the statewide Payroll System. The Payroll System will interface summarized payroll costs to FINET on a bi- weekly basis where optional labor additives are calculated. Detail information concerning wages, other earnings and benefits paid must be found in the Payroll System.
Definitions
Labor Additive
In the context of this section of policies and procedures, any added cost based on labor costs.
Labor Distribution
The complete set of system features related to gathering employee hours, determining the full cost to the State of employee services, and adding to that cost any mandatory or optional additives.
Pool
A cost center where costs are pooled for a specified event. Funds are
taken out of the pool to pay for the event when it occurs.
Time Distribution
The method of assigning employee hours and other earnings to FINET account codes.
Background
Labor distribution can be broken down into three distinct areas. These are time distribution, mandatory pools, and optional labor additives. Time distribution is the mechanism which allows the assignment of employee hours and other earnings to FINET account codes. The mandatory pool calculations are performed through the Payroll System and accounting transactions are sent to FINET for posting. The optional labor additives are a FINET process and do not occur in the Payroll System.
Time Distribution:
The statewide Payroll System is the point of data entry for all employee hours and the accounting distribution of those hours. The Payroll System performs the calculation of all direct and associated payroll costs as well as the calculation of mandatory excess/comp and Termination Leave pool amounts.
The discussion of time distribution in the Payroll System will only cover basic information. For further information concerning this feature refer to the Payroll policies and procedures.
Mandatory pools:
Excess/Comp Pool – The purpose of the excess/comp pool is to charge excess and comp against the budget when earned, not when used. When excess/comp is used the funds are taken from the pool.
Excess are the total hours exceeding the overtime base that are charged but not worked. An example of this is when a holiday is encountered during the regular work week. If a non-exempt employee works 42 hours during the week then the employee would earn 8 excess hours and 3 (1.5 * 2 hours ) hours of comp time.
Comp are those hours worked in excess of the overtime base. For exempt employees the overtime base is 80 hours. For non-exempt employees the overtime base is 40 hours.
Termination Leave Pool – The purpose of the Termination Leave pool is to charge termination payouts against the budget when earned, not when used. When the termination or retirement occurs the funds are paid out from the pool.
Vested annual leave and vested converted sick leave are paid out of the Termination Leave pool when an employee terminates employment. When an employee retires, vested annual leave, vested converted sick leave, 25% of sick leave cashout, retirement health insurance premiums, and life insurance premiums are paid out of the Termination Leave pool. The payouts from the pool occur automatically by the Payroll System.
Optional labor additives:
Leave Usage Additive – Allows a percentage to be added to direct payroll costs to charge for compensated absences when earned. An example would be to charge annual leave costs, when earned, to a federal program.
An alternate approach is to use the additive to charge for compensated absences which are expected to be used. In other words, this alternative would add the approximate cost of leave which is expected to be used (which may be higher or lower than the cost of leave earned).
Determining which approach is appropriate for your agency depends on the circumstances and the reasons why the additive is being used.
Indirect Cost Additive – Allows the charging of an additive based on direct payroll expenditures (both salary and benefit costs). An example would be to charge administrative overhead to a federal program.