A Rate Subsidy is Being Awarded Incorrectly in Client Payroll Calculator

In the most recent payroll, this employee is being given a rate subsidy even though the average rate on each day is already at or above the guaranteed rate in effect for that date. Why is the rate subsidy being awarded? 

Solution

Provided below are the different areas to look for setup that may be affecting the calculation of rate Subsidy.

Check Pay Codes

Check the pay codes for the job steps in which the employee worked.

  1. Build the payroll batch and review the employee in question.
  2. Review the Time Sheet for Labor History for the period and person in question.
  3. Check the pay code for each job step the person worked. Is the pay code’s “Apply to subsidy” option checked? 
    • If the option is checked, time spent in this job step will be included in the subsidy. For example, if the job step is for lunch and the pay code indicates that the time applies to subsidy payment, time spent at lunch will be subsidized. This tends to lead to over-awarding of rate subsidy pay. Generally, non-paid, non-work time should not apply to subsidies, but this varies by agency. 

Check the agency’s guaranteed rate period

  1. Use the Tools menu to select ‘Payroll System Options’ and click the Rates tab.
  2. In the section marked ‘Guaranteed rate period’, check the date and day of week the Guaranteed rate Period Starts.
  3. Review the Time Entry and Premium/ Subsidy tabs to see what is the first day of the week. Do all three start on the same day of the week?
  4. Next, access the Employee Setup subject for the employee in question. On the Wage Rates tab, find the Guaranteed wage rate and make a note of the date and day of the week on which it becomes effective.
  5. Check that the Guaranteed wage rate and the Guaranteed rate period are set for the same time frame. For example, if the period is set to ‘Weekly’, the effective date of an employee’s guaranteed rate is not that specific date. Instead, the rate takes effect in the week of the effective date. In other words, if the effective date of the rate is Friday 1/10/2020 and the rate subsidy period is set to weekly, then that wage rate takes effect for the entire week of 1/6/2020, 1/10/2020 and later. As a result, you will see the calculation for the week calculated based off the rate dated for 1/10/2020.

The same can happen if the period is biweekly, but the rate subsidy has been set up with a beginning date not on the same day of the week as the biweekly. You will need to make sure the date for Biweekly also starts at the beginning of the biweekly pay period.

Build the Payroll

  1. Build the payroll batch and find an employee who received the rate subsidy and review their information.
  2. Run the Payroll Edit report. This will show the regular and rate subsidy earnings as well as total earnings per day for the employee.
  3. Run the Payroll Exception. This will show the specific days on which subsidy amounts were awarded and the amounts for that employee.
  4. Create a table that shows the date, number of productive hours, regular earnings, subsidy earnings, total earnings and average hourly wage for each day on which a subsidy was awarded.  The average on this line – which is a simple average of the total pay / productive hours, review pay codes to make sure they apply to subsidy. If the dates start on the same day of the week and pay codes apply to subsidy then the rate can be compared to the Employee’s Guaranteed Wage rate to see if it under, over or the same.
  5. You can determine if the period, the day that is the start of the week or Pay Codes are correct or if information needs to be updated. You can unbuild the batch. If you do any of the fixes below, rebuild the batch and see how this affects the rate subsidy pay.

 Additional Comments

  • Un-check ‘Apply to subsidy’ for pay codes that should not apply toward subsidized earnings.
  • The Guaranteed rate period in Payroll System Options can be set to daily calculation. This ensures that each day is treated as a single entity, rather than a day being part of a larger set such as a week.
    •  The agency needs to understand that applying guaranteed rates over the course of a week actually tends to work in their advantage, because the system attempts to ‘smooth’ earnings over that period, so that days of particularly low earnings are somewhat balanced by days of high earnings. When the period is set to Daily, it often leads to higher subsidies, not lower.
    • Changing the guaranteed rate effective date can be a trial-and-error affair because the system will not allow effective dates to overlap, occur within a pay period that has already been built or to create a gap between the end of one period and beginning of another.
  • The employee’s guaranteed rate can be set to take effect at the beginning of a week, pay period etc. to coincide with the setting in the rate subsidy period. In other words, instead of making the effective date the ‘middle’ of the rate period, make it take effect at the beginning of the period. This should synchronize the calculation of the subsidy to the calculation period. 

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