Setting Up Payroll Factoring

Objective

After completing this lesson, you will be able to identify where partial period parameters are found in a payroll log

Concepts of Factoring

Factoring is applicable in the following scenarios:

  • Reduction in pay
    • Joining or leaving a company during payroll period
    • Unpaid absences
    • Paid absences
    • Inactive work relationship
  • Calculation of pay for exact periods
    • Changes to basic pay
    • Changes in organizational assignment
    • Changes in personal work schedule
  • Calculation of Cost Accounting wage types for exact periods

Within SAP Payroll, factoring describes the pro rata calculation of remuneration for an exact period. Periodic remuneration consists of primary wage types assigned to an employee as basic pay, recurring payments, or additional payments. Factoring only covers the events that occur in the current period.

During the payroll run, the system evaluates changes relevant to factoring in the following infotypes:

  • Personnel Actions (0000)
  • Organizational Assignment (0001)
  • Planned Working Time (0007)
  • Basic Pay (0008)
  • Recurring Payments/Deductions (0014)
  • Additional Payments (0015)
  • Absences (2001)

If a situation arises during the payroll run that triggers factoring, the current factor is calculated and then multiplied by the wage type assigned.

Partial Period Factors

Image indicating a change in basic pay midway through the payroll period. Partial period factors 01 and 02 are both 0.5. Tables show values before and after factoring, reducing amounts by half.

In a payroll, a factor is required to calculate partial period amounts.

The partial period factor is a value between 0 and 1. As soon as you make changes to the master data that trigger factoring, the factor is multiplied by the employee’s primary wage types for exact periods. This is done if the primary wages types must be reduced, or if their constituents for the exact periods must be calculated separately.

The calculation of partial period factors is always based on times that result, for example, from the employee’s personal work schedule or absences.

Personal Work Schedule (PWS)

Image displaying dates with various work statuses, daily types, and public holiday classes. Additionally, there are explanatory notes where red text denotes different day types, blue text denotes public holiday classes, and a note on numbers 0-9.

At the start of subschema XT00, function GENPS generates the personal work schedule (PWS) for the personnel numbers for which the payroll program should be run. For time data evaluation, each employee is assigned to a general work schedule (infotype 0007), which defines planned working time on the basis of the relevant employee’s work center assignment. If an employee is assigned to different work schedules during a payroll period due to a change of work center or substitution (infotype 2003), then the planned working time of the employee will comprise several general work schedules.

The preceding figure shows an excerpt of table PWS for one personnel number with a monthly payroll period. The table specifies the last day of the previous payroll period and the first day of the subsequent payroll period, as the system requires this data, for example, if the relevant day is a public holiday.

Partial Period Parameters

Projection of working time, payroll constants, unpaid absences, paid absences, and public holidays shown in hours, workdays, and calendar days for partial and whole periods.

At the start of subschema XT00, function PARTT accesses data from the personal work schedule (table PSP) to determine the partial period factors for the payroll period. The system also takes the substitutions into account, if required. The total working time for the partial periods is calculated by applying the relevant partial period of the valid work schedule to the other partial periods of the payroll period.

You maintain constants ADIVP and KDIVP according to the time unit of the payroll period in the view Payroll Constants for Time Unit.

The variants for planned working time according to the employee’s personal work schedule (PSP) for a specific basic pay period are as follows:

  • KSOLL: Planned work measured in calendar days
  • ASOLL: Planned work measured in workdays
  • SSOLL: Planned work measured in working hours

The variants for unpaid absences for a specific basic pay period, possibly weighted, are as follows:

  • KAUxx: Unpaid absence measured in calendar days
  • AAUx: Unpaid absence measured in workdays
  • SAUxx: Unpaid absence measured in working hours

For the options, either xx = nn stands for the unpaid absence counting class, or xx = ** stands for the sum of all unpaid absences (for all counting classes).

The variants for total working time for the payroll period in accordance with the employee’s work schedule in a specific basic pay period are as follows:

  • KDIVI: Total working time measured in calendar days
  • ADIVI: Total working time measured in workdays
  • SDIVI: Total working time measured in working hours

Display Partial Period Parameters (1)

Tables showing working time projections, payroll constants, unpaid absences, paid absences, and public holidays for partial and whole periods. Labels clarify the meaning of values and include calendar days, workdays, and working hours.

In the example shown the employee is a part-time worker in the first half of the payroll period with an employment percentage of 50%.

In the second half of the payroll period, the employee is a full-time worker with a 100% employment percentage.

The total working time SDIVI of both partial periods is calculated by applying the respective partial period of the valid work schedule to the rest of the payroll period.

GSSOLL contains the employee’s planned hours from the first to the last day of the payroll period, and it equals GSDIVI in this example.

If, for example, the employee joins the company on the fifth day of the payroll period, GSSOLL will contain a smaller value than GSDIVI because the planned hours are only counted from the day the employee joins the company.

Pay Reduction Methods

Image explaining payroll adjustment during many absences in a period. Long month results in a claim on employees if absences exceed average hours. Short month allows employees to receive some pay if absences are below average hours.

The deduction method multiplies the employee’s hourly or daily rate by the number of unpaid times, and deducts the result from the employee’s pay. The number of working hours specified per period is used as the divisor.

If the payroll program is run for monthly periods, the general divisor determines that each calculation unit (hour or day) has the same value irrespective of whether the period is a long or a short month.

The deduction method is not suitable to use in the following situations:

  • In the long months, such as July, a large number of absences could result in negative remuneration, that is, money would be claimed from the employee.
  • If the payroll is run on a monthly basis (monthly or half-monthly) and the employee has many unpaid absences.
  • In short months, such as February, the employee could be absent for the entire month and still receive remuneration.
  • If partial remuneration must be calculated for exact periods, the employee would receive an amount that is different from the amount of remuneration effected for the period, because the number of hours or days does not correspond to the average.

Formula for the Payment Method

Explanation of payroll calculation showing issues with few absences in long or short months: long month leads to overpayment (-1.049), short month leads to significant reduction (0.906).

In the payment method, you can remunerate the employee for the period he or she has actually worked or for paid absences. Calculation of the hourly or daily rate for the payroll period is based on the amount of remuneration agreed upon and is multiplied by the number of hours or days to be paid. The number of working hours specified per period is used as the divisor. If the payroll is run for monthly periods, the general divisor determines that each calculation unit (hour or day) has the same value irrespective of whether the period is a short or a long month.

It is not suitable to use the payment method in the following situations:

  • In long months, such as July, a few absences could result in a factor that is greater than 1, that is, the employee would be paid too much.
  • In short months, such as February, the employee could work almost the entire period and still earn considerably less.
  • If partial periods are calculated for exact periods, the employee would receive an amount that is different from the amount of remuneration effected for the period, as the number of hours or days does not correspond to the average.

In practice, a hybrid of both the payment and deduction methods is often used. The deduction method is used for up to 10 absence days and the payment method is used for more than 10 absence days. However, this procedure also causes problems because changing from the deduction to the payment method gives rise to great differences in the valuation of remuneration. This can lead to unwanted situations.

Formula for the PWS Method

Image showing an equation on how to calculate planned working time minus absence over projected planned working time. The problem highlights varying reduction factors and indicates the hourly rate is lower in long months than short months.

In the PWS method, the actual planned working time according to the employee’s personal work schedule is used as the divisor.

The PWS method is particularly suitable for reductions if planned working time is specified exactly and all deviations from planned working time are entered in the system.

Deviations that frequently occur from planned working time are the result of changes to the following infotypes:

  • Absences (2001)
  • Substitutions (2003)
  • Planned Working Time (0007)

The PWS method is also suitable for calculating partial payments for exact periods.

Secondary Wage Types for Period Factors

Image of a yellow triangle on the left with Function GEN/8 written inside points to a table labeled Table IT. The table has columns NUM, RTE, and AMT. Example entries: NUM=3 /801; RTE=01 or 02; AMT=100,000.

Function GEN/8 generates secondary wage types /801 to /816. Factoring values are assigned to these secondary wage types during calculation.

By accessing GEN/8, the system determines the following:

  • The system generates and writes secondary wage types /801 to /8nn to the input table IT for each WPBP (Work Center Basic Pay) split period.
  • The factor is set at 1 in each secondary wage type /8nn generated and then multiplied by the constant GENAU 100,000.00 to increase the accuracy of the calculations. The result is written to the RTE (Rate) field.

In the standard system, the system generates 16 secondary wage types for the partial period factors. You can use 9 of these secondary wage types for your own partial period factors. Secondary wage types /810 to /816 have a meaning within the system.

Learning

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