Understanding Contract Earnings

This topic discusses:

  • Worked earnings.

  • Other earnings for contract pay.

If an employee completes a contract without interruption, then by the end of the payment term, the employee has performed all of the contract work and thus earned the entire amount paid. However, if the employee does not complete the entire contract, you must know how much the employee has actually earned so that you can adjust the contract pay accordingly. This amount that the employee has actually earned is considered the worked earnings.

Worked Earnings Calculation Methods

The system provides two methods for tracking worked earnings:

  • Actual divides the total contract pay by the number of work days in the contract to produce a daily rate for worked earnings.

    In pay periods with no unpaid leave, the worked earnings are the daily rate multiplied by the number of work days in the period. Because pay periods don't always have the same number of work days, the worked earnings vary by pay period.

  • Prorate divides the total contract pay by the number of pay periods in the contract term to produce a pay period rate for worked earnings.

    In pay periods with no unpaid leave, the pay period rate is also the amount of worked earnings.

    The Prorate method uses the daily rate (the same daily rate that the Actual method uses) to reduce pay for unpaid leave and to allocate earnings for paid leave.

Determination of Actual Work Days

The system determines the actual work days in the contract term and in the pay period by looking at these three elements:

  • The employee's work schedule: selected days of the week are work days.

  • The school schedule: school breaks are not considered work days.

  • The holiday schedule: holidays are considered work days unless the contract pay settings exclude holidays.

    Even though employees don't actually work on holidays, paid holidays are treated like paid work days for purposes of tracking the employee's actual earnings.

Regardless of the method for calculating worked earnings, the contract pay calculation process tracks these three types of earnings:

Field or Control

Definition
Contract Regular (CRG)

Contract regular earnings are the portion of worked earnings, as calculated by the Prorate method, that are attributed to actual work days rather than paid leave.

For example, if a contract for 60,000 CAD has a contract term of ten months and a monthly frequency, and there are no paid holidays, then the projected contract regular earnings for each of the ten months is 6,000 CAD, regardless of the payment term.

In a month where the employee takes two days of unpaid leave, the actual contract regular earnings are reduced by two times the daily earnings rate.

Note: When worked earnings are calculated using the Prorate method, the worked earnings are the sum of contract regular earnings and paid leave earnings.

When worked earnings are calculated using the Actual method, the contract regular earnings are not used in the calculation; the worked earnings can be either more or less than the contract regular earnings, depending on the number of days in the pay period.
Paid Not Earned (PNE)

If the payment term begins before the contract term, earnings for the periods before the contract starts are paid, but not yet earned and therefore allocated to the Paid Not Earned earnings code. The system then reduces the PNE balance over the course of the contract term by prorating the amount of PNE across the contract term and creating corresponding negative PNE earnings during each pay period. At the end of the contract term, the PNE balance is zero.

For example, there is a contract for 60,000 CAD with a payment term from July 1 to June 30 (12 months), and a contract term from September 1 to April 30 (eight months). The level payments are 5,000 CAD per month for twelve months.

During July and August, there are no contract regular earnings, so the entire 5,000 CAD per month is allocated to PNE, for a total of 10,000 CAD at the time the contract term starts. To reduce this to zero by the end of the contract, the system divides 10,000 CAD by the eight months of the contract, with the result that -1,250 CAD is then applied to PNE during each of the next eight monthly pay periods.
Earned Not Paid (ENP)

This is the amount by which the worked earnings exceed the amount paid, adjusted for any Paid Not Earned amounts.

If worked earnings are greater than the adjusted actual pay, this is a negative amount. If worked earnings are less than the adjusted actual pay, this is a positive amount.

For each pay period, the total paid is the sum of the contract regular, PNE, and ENP amounts.

Note: You assign specific earnings codes for contract regular pay, PNE, and ENP in the Pay Group Table component.