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Payroll Commitment and Obligation Accounting

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Payroll Commitment and Obligation Accounting

The Payroll Commitment Accounting initiative launched in early 2023 to enhance Brown University’s ability to project payroll expenses in real time and inclusive of changes to positions and costing allocations that occur throughout a fiscal year in Workday.

Payroll Commitment Accounting is a critical tool for both university leadership as well as decentralized departments charged with forecasting spend in alignment with their budgets and in managing fiscal resources. Additionally, over time, the automation of Payroll Commitment Accounting will limit the need for manual projections. Payroll Commitment Accounting is the process in Workday that encumbers base salary across all funding sources for staff, faculty, postdocs and supported graduate students for the fiscal year to forecast payroll spend for both filled and unfilled positions.

Commitments are generated for unfilled positions and obligations are generated for filled positions in this process. Both obligations and commitments can be used in conjunction with position budgets and actuals to provide a full, predictive forecast of actual spend at the end of the fiscal year as early as the first quarter of the fiscal year.

Project Background

Cross functional team members from Accounting, Office of Sponsored Projects, Office of Financial Strategy and Planning, Payroll, University Human Resources and Workday Program have been collaborating to support the implementation of the project, In July 2024, Payroll Commitment Accounting will go live and allow central office as well as departments to project payroll accounting spend throughout the fiscal year for the positions they support.

How Will This Impact Me

University leadership and department staff with access to financial reporting and charged with managing financials for their organizations will have access to Payroll Commitment Accounting in Workday. Payroll Commitment Accounting will be primarily accessed through Workday financial reporting to support forecasting in their organizations and to inform financial decision-making. More information about available financial reporting will be available in the coming weeks.

Key Terms

The following are key terms to help define how payroll commitment accounting is supported:

  • Payroll Encumbrance: Projected accounting based on current position information
  • Payroll Obligations: Payroll encumbrances generate for filled positions and are updated when position changes occur. Payroll obligations will be generated in the obligations ledger.
  • Payroll Commitments: Payroll encumbrances generated for unfilled positions and will be liquidated when the position is filled. Payroll commitments will be generated in the commitments ledger.
  • Base Year: The initial fiscal year of the commitment/obligation period is called the Base Year. In the base year, commitment obligations are created for all financial worktags. The base year will change consistent with the current fiscal year. For example, when the fiscal year is FY25, the base year is also FY25. Additional fiscal years of the commitment/obligation period are strictly for the Grant worktag.
  • Period Schedule: The period schedules are set based on Brown’s pay periods and payroll schedule. Period schedules are set well into the future to accommodate additional fiscal years of data and are updated annually.
  • Payroll Actuals: Payroll accounting that is recorded when salary is paid. Actuals only occur in periods when the pay period is closed and finalized.
  • Payroll Commitment Rules: The payroll commitment rules are used to determine the pay components that will commit and obligate. Only base pay components will be calculated. This does not include time off, overtime, shift differentials, bonuses or undergraduate student wages.
  • Active, Filled Positions: All active, filled positions staff, faculty, postdoc and graduate students that have a base compensation plan will be assessed for a payroll obligation. Workday assumes that an active, filled position will remain that way for the entire Base Year; therefore, it is important to ensure the costing allocations are in place for the entire Base Year or an end date for the position and/or compensation plan should be added.
  • Filled positions without a costing allocation will have obligations generated based on the default organization assignments for the position.
  • Unfilled Positions with Requisitions: Unfilled positions with requisitions will generate a payroll commitment based on the target hire date of the requisition. Default worktags associated with the organization assignments will be used as charging instructions to generate the commitment. A costing allocation can be associated with the position restriction for a position with an active requisition to encumber additional worktags beyond cost center, business unit, fund and expense purpose code.
  • Adjustments: Changes to positions including compensation changes, terminations, new hires, pay cycle updates, costing allocation changes and position end dates impact the payroll commitment process. In order to address position changes, the commitment adjustment process will be run daily Monday-Friday, and reflected in reporting.
  • Obligation Liquidations: Obligations liquidate from the worktags present in the costing allocation on the payroll payment date. If the ledger account varies after the creation of initial obligations, there could be a mismatch. Liquidations use the most current account posting rules, while the obligations will use the posting rules applicable at the time of the obligation creation.

Project FAQ

Payroll commitment accounting is a payroll encumbrance tool that provides the university with transparency to project payroll and fringe costs in comparison with position budgets based on funding sources.

Using our existing obligations and commitment ledgers, projected payroll and fringe spend will be generated at the position level.

Payroll commitment accounting will also automatically adjust daily to include position changes that would impact encumbrances including costing allocations, updates to position information such as compensation and percent time changes as well as leaves of absence and terminations to provide real-time forecasting data for the entire fiscal year.

Enabling payroll commitment accounting will automate the projected payroll costs in relation to position budgets that are done manually today. Limiting manual work associated with modeling this data will assist the university in data-driven decision-making and align resources to more strategic efforts.

Once enabled, obligations will be generated for filled staff, faculty, postdoc, and supported graduate students in the existing obligations ledger. Each day, this ledger will update with any changes, additions, or remove obligations from employees departing the university. After each pay period, obligations for the individual period will liquidate and appear as actuals.

Commitments will be generated for unfilled positions in the existing commitments ledger and be updated when the position is filled to reflect an obligation going forward based on the hire date.

Filled positions for staff, faculty, postdocs, and supported graduate students will generate obligations when payroll commitment accounting is enabled. Unfilled, requisitioned positions for staff, faculty, postdocs, and supported graduate students will generate commitments.

Base earnings will be encumbered through payroll commitment accounting. This would include all salary plans and hourly pay plans. This will not include traditional allowance plans for pay supplements, overtime, and one-time payments. Student hourly earnings will also not be encumbered.

No, sabbatical earnings are not encumbered since these are included as part of the fringe benefits rate.

All positions, regardless of funding source, will be reflected in the obligations and commitments ledger. Grant-funded positions generate four additional years of obligations beyond the initial fiscal year to help project payroll accounting on grants.

Payroll commitment accounting is a tool to forecast how payroll accounting will occur and data that needs to be updated to align with budgets and the allocation of position funding. Reviewing position and costing data for individuals you oversee in Workday will ensure accuracy.

Yes, all staff, faculty, postdoc, and supported graduate student positions will be encumbered through this process. Payroll commitment accounting will be determined by the active costing allocation and associated dates.
If the costing allocation:

  • End date is before the end of the fiscal year, the allocation for the remainder of the period will move to the default worktags associated with the position
  • Is updated within the fiscal year, the payroll obligation will follow accordingly

Yes, adjustments to payroll obligations and commitments will occur daily. Any position-based or costing allocation changes will be reflected in the obligations ledger based on the effective date the day following the adjustment. Retroactive changes to costing allocations are not supported. Payroll Accounting Adjustments should be used to address retroactive costing allocation changes (i.e. for payroll actuals that have already been processed/recorded in Workday). These changes will only be reflected in actuals.

Obligations can be updated by taking desired action on the position. Compensation changes, edits to positions, and changes to pay cycles should be made as needed to address inaccurate obligations and subsequently correct data inaccuracies for an employee at Brown.

No, payroll commitment accounting and associated obligations and commitments is only a forecasting tool and will not generate pay.

Any individuals who have access to financial reporting in Workday for cost centers that they oversee will have access to view commitment accounting.

Updates to payroll commitment accounting in the obligations and commitments ledgers will be reconciled daily through an adjustment process that will run each night. If you cannot view your change in the updated obligation information, please confirm your process has been approved and successfully completed. After confirming the process is complete and the change has not been addressed, please enter a Workday Help Ticket under the category of Commitment Accounting.

Obligations will liquidate on the payment date after each pay period. At the end of the fiscal year, obligations should reflect a zero balance. Commitments will liquidate when the position has been filled.