Pay Items are records that contain information about how an entry on an employee payslip is calculated. Pay items can hold hours and dollars, be used in the calculation of other values, determine what appears on a payslip and where it appears, and can be used to determine what GL accounts are used during the payroll process.

Pay Items are not Company specific, and must be included in a sequence which in then associated with selected employees. Pay items are associated with Earning Categories for wages, Pay Calculations for fringes and deductions.

This document will assist in creating Pay Items and outline what fields are significant for Australian payroll.

Australia uses only two types of pay items:

Hours - Use with pay items which will be mapped to Earning Categories that use hours and wages. Categories such as Salary (SAL) or Holiday Pay (HOL) need to have Pay Items with a type of Hours in order for the hours to appear on the pay slip.

Subtotal - Use with any Earnings or Calculations that does not require hours to be displayed on a pay slip.

A standard set of SureStart Pay Items has been created to handle most Payroll issues. Items are reserved for Earnings, Employer Tax Burden, Fringes in Pay, Fringes not in Pay, Pay Calculation Deduction, Contract Calculation Deductions, Union Deductions, as well as Pay Items designed to represent Disposable Earnings (for garnishments) and Extra Direct Deposits.

Additional Pay Items are used to hold Gross Wages, Net Pay, Total Employer Burden Cost, Total Deductions, and Total Burdened Labour.

It is not necessary to use Pay Items in the Union Rate File or the Contract Rate File. Pay Items, which represent earnings, will come from the Earnings Category File.

Payroll Company Configuration holds significant pay items. This file explicitly details the pay items that represent specific values of pay such as Gross, Reimbursable, and Net Wage items, Australia Tax Withholding items, Statutory Employer items, and the item representing Total Burden.

Payroll > Company Setup > Company Configuration

Although many of the ATO Pay Items have now been built into the tax tables these items still must remain within COINS.

The Pay Slip field on a Pay Item determines whether it will displayed on a payslip and where it will display. The SureStart Standard AUS Payslip has been built to include year to date values, so you only need to determine if the value held in the Pay Item will be classified on the payslip as Payment, Deduct, Other, or not at all - None.

While a PAYG Tax and all other reductions in pay will be classified as a Deduct, most earnings will appear as Payment. How you classify a Reimbursement issued along with payroll is up to the user, but most will be classified as other, since it is not a payment that will affect Earnings for the period or year.

Additional Extra Pay Bank Accounts will automatically be classified as None based on standard OA functionality. You must identify the Pay Items that will hold additional Pay Banks in Payroll parameter XPAYITMS. These pay items should appear after Net Pay in the sequence.

COINS will collapse all hours into a single entry in Contract Status unless the user directs otherwise. COINS allows for hours to be defined in up to 9 different presentations in Contract Status. The standard will be Regular, Overtime, and Double Time, but some clients may wish to include Indirect Hours as a standard definition as well.

To define how hours will be presented in Contract Status, follow the steps below.

Define how hours will be presented in Contract Status.

Payroll > Global Setup > Pay Items

 Pay items are used to hold Gross Pay, Net Pay, computed values used in Payroll, such as Withholding, as well as to create a user-determined Gross Pay Amount used for other computations. Pay items used must be included in any sequence associated with a Payroll run.

When creating a new Pay Item you can either Add or Copy an existing. If there are, any Pay Items that work in a similar way in which you require the new pay component to function it may be easier to copy and modify the record rather than adding a new pay Item.

When used in Australian Payroll, Pay Item Effects are currently limited to Add and Subtract only. Since pay items are shared among all Payroll companies, you must consider the setup and maintenance of pay items. Changes can produce unwanted effects. Additionally, if pay items are added, you need to review sequences to see if they need to be modified to include new pay items.

NOTE:

Do not delete Pay Items that are no longer required. Make the Earning Category or Pay Calculation Dormant.

2. Pay Item number groups are as follows for SureStart:

100 – 199 Payment items

200 – 299 Allowance items

300 – 399 Pre tax deductions items

400 – 499 After tax deductions items

600 - 799 combination of oncost and Tax

803 – 806 Extra pay bank accounts

928 – 946 Termination items

3. Type the description of the New Pay Item

4. What type is the new Pay Item; Hours or Amount (sub-total)

5. Years History for Australia is currently 7. The number of years you wish to retain history for this item.

6. Select Year End Clear is the item value should be cleared at the end of financial year and reset to zero value.

7. Payslip type: where the item is to appear on the Payslip, Payment, Deduct, Other or Not at all. (All pay items will have YTD, so it is not necessary to use these options in the drop down menu.)

8. If the Item should be hidden on the Payslip; Always, Never or only when the value is Zero

9. Unit: defined in Procurement (refer to 2.6) this will be used for Detailed postings, groups items into a single entry. Mainly used for Hours type Pay Items. Can assign Lump Sum payments into single entry, for example all termination payments with Unit type being LMP.

10. Effects; These fields contain the effects (actions) that can be performed on another pay item. Currently AUS payroll only use Add and Subtract.

Generally, the ‘effects’ section details how this component is processed in the calculation. In the example below, this pay item is added to item 617 (AUS Gross Pay +Total), 697 (AUS NETT PAY +Total), 767(AUS Payroll Burden). This makes COINS payroll calculation highly configurable.

Allows you to hold data relating to the pay item’s use. For Australian payroll you may use

Type=Memo which will enable on the Payslip to only show total Gross of earning.

Type =RateMemo which will enable on the payslip to show Hrs/units and hourly rate including the Gross of the earning

No Item Notes for memo types will enable on the payslip to show hrs/units and Gross only of the earning

As an example;

Kilometers allowance rate can be defined on the ‘Award for $0.7856. The earning Category KM is a Memo type.

Fare allowance rate may also be defined on ‘Award’ for $5.58 per allowance and this allowance type is also a memo.

Sit allowance rate may also be defined on ‘Award’ for $2.66 per allowance and this allowance type is also a memo. The rate may very depending on contract or skill level.

When a timesheet entry is added, the rate will default from the ‘Union’ and the employee will need a number of units in which the Pay Component is to be paid. In this case 2 units of Fare allowance at $5.58 per unit, Gross value total $16.73.

When the Payslip is printed, it will be dependent on the pay item whether the unit/hours or rate are populated.

Pay Items hold information on how payroll costs incurred will be posted to Contract Status and the GL. Both Debits and Credits will be determined here.

All of the Pay Items associated with the cost of Labor are rolled up into a single pay item, defined as Total Burdened and Allocated Costs, for expense purposes. When posting to Contract Status or the General Ledger, costs are summarised at the Analysis (Contract or GL) level for each payroll period for each Unit (hour) measured.

In the example below, all earnings, employer burdens, payroll tax, and workers comp are rolled up into a single Pay Item 767. The costing will be a DEBIT to accrue the expenses, and the cost method will be contract. The General Ledger entry will come from the cost code portion of contract analysis entered on each timecard.

Credit Entries posted to the General Ledger need to be defined on Pay Items. The entries will comprise employer liabilities, employee taxes withheld, and Net Wages. Users will need to set Pay Items which represent these pieces of payroll to create Credit Entries.

Users can use Masking to build a General Ledger Account. The ‘Default Cost Order’ field on a Pay Item tells COINS where to look to get each element of the General Ledger. When masking is being used, the account will contain (_.) to represent GL Elements. COINS will begin looking in Employee Maintenance, Department, or pay item as per the order to step through until a complete GL Account is built.

Generally, if a company is accumulating all of its liabilities in a single "division" on the Balance Sheet, the GL will probably be defined solely in ‘Oncost % configuration’ (for Payroll Tax and Workers Comp) or the Pay Item.

There are pay items that need to debit the General Ledger to reduce the employer liability for example Personnel Leave. Users will need to set the pay item for these types to ENTER and suppress the GL costing.

Therefore, the pay item will debit the GL account but will suppress the corresponding Credit entry.

Suppress GL can only be selected if costing is set to ENTER otherwise will error. The posting summary will default to Summary as no posting will occur for the pay item

Users can use Masking to build a General Ledger Account. The ‘Default Cost Order’ field on a Pay Item tells COINS where to look to get each element of the General Ledger. When masking is being used, the account will contain (_.) to represent GL Elements. COINS will begin looking in Employee Maintenance, Department, or pay item as per the order to step through until a complete GL Account is built.

If you wish to expense costs to a GL account other than the one prescribed on the cost code, you will need to set up the components of your Total Pay Item to allow for additional postings. All of the standard components of payroll, such as taxes and workers comp, can be configured to post to unique GL accounts. Additionally, Employer provided expenses such as Super Guarantee and Oncost can be configured to post to individual sub accounts.

On the Pay Item that represents Super Guarantee set your Liability account with subaccount as the generic i.e. TOTAL or GEN.

Set Additional Posts to 2, and complete the Additional Postings to create a GL based Credit entry, with the default cost order as P and the GL account masked to Direct Labor Oncost. Create Debit entry to the appropriate expense account for the Pay Item with subaccount SUPER.

When the Calculation is run, the full value of Burdened Labor will be shown in the GL Account defined on the transaction's cost code. A Credit offset will be created to the same GL Account with new subaccount, and Debit will be created to the appropriate GL Account representing this component of Labor with new subaccount.

Using this method will allow for various employer provided Fringe Benefits to post to separate expense accounts rather than posting to a single bucket. Aide in GL reconciliation and will provide greater auditability/traceability.

For example in the below Payroll Costing Workbench:

The transactions against an employee where there is additional postings for a Pay Item 600, there will be a credit entry for Super Guarantee for a total amount going to 99.71100.TOTAL or the GL assigned to the Pay Item default costing.

Because of the additional postings on the Pay Item, a Debit entry for a negative total dollar value to __.____.LABOC and positive Debit entry for $ amount to __.____.SUPER will be created once the CALC process is run.

The total payroll Burden 767 is the total employee wages + all oncost.

Subaccount LABOC will allow you to get total oncost value for an employee.

Payroll > Global Setup > Item Sequences

While Pay Items can be created in any order, their appearance in a sequence must follow payroll logic. For example, we must know an employee's Gross before we can calculate the Employee Tax. While a standard sequence will be included in SureStart, it is important to understand how to create and modify a sequence.

You can use the Item Sequences function to set up pay item sequences, which are the building blocks of pay items. They control the items that appear on each employee's timesheet and are used in their Payroll calculation.

When the pay calculation is performed, the program works through a sequence of pay items in order to calculate the pay. Generally, the sequence will not be changed but if you add a new Earning Category or Pay Calculation, you must ensure it has a corresponding Pay Item and ensure this is in the Pay Sequence or it will not be included in the calculation.

Pay sequences can be made up of individual pay items, or ‘blocks’ of pay items. A ‘block’ of pay items is itself a pay sequence. For example you could create a ‘block’ of before tax allowances, a ‘block’ of after tax allowances etc, and include the allowances in the appropriate block, rather than having them individually listed in the pay sequence, so it is easier to maintain.

Below is a block ‘PAY’ – Payments that holds items that relate to paying employees wages.

Below is the Standard AUS ‘Australian Processing Sequence’. It is made up of blocks and individual Pay Items.

For Australian payroll, the Item Sequence is than assigned to the company pay frequency in ‘Company Configuration’.

The Item sequence to be used when processing an employee’s pay is defined on the ‘Employee Maintenance – Profile’ Tab. It will default from the ‘Company Configuration’.