Making Effective-Dated Changes to Confirmed Salary Packages

Details in a package may change during the course of the package period. The employee might choose to discontinue a package component, or the details of a component might change because of legislation or company policy. You can reflect these changes as effective-dated changes to a package.

If you know of these changes at the time of modelling the package for the employee, it is possible to use the component from and to dates to reflect the changes.

If you do model the package to reflect changes in component details during the course of the package, the package enrolment process recognizes these changes and inserts multiple records for the respective benefit, deduction, or payroll data. This ensures that accurate payments can be made without further intervention.

If, however, you do not know about changes immediately, and you have to change details later in the year, you can simply enter an effective-dated change. After you confirm and enrol the change, it is administered through payroll, in accordance with the new package details.

To make an effective-dated change to an employee package:

1. Access the current salary package by using the Package Model page in the Employee Salary Package component.

2. Insert a new effective-dated row.

3. Modify the effective date to indicate the effective date of the change you are making.

   The effective date controls whether you are making a change to an existing package or model a new package.

4. If you are making an effective-dated change to an existing package, the effective date must be between the package start and end dates of the existing package.

5. If you make an effective-dated change where the effective date is equal to the effective date of a package that is already confirmed, use the model number to show that this is a later change.

   By increasing the model number to any number higher than the confirmed model, the new record is recognized as a later change for that effective date.

The difference in process between remodelling for an employee and making an effective-dated change in a package is subtle. Essentially, the only difference is whether the new effective date is within or outside the package period for the existing package.

Despite the subtlety in process, the business impact is more dramatic. Modelling a new package for an employee, on review or for any other reason, means that all expenditure values are reset. This means that when you next look at the Expense Summary process, it reflects only expenditures since the new model was enrolled and payments were made against that package.

When you make an effective-dated change to a package, the expenditure details for the package to date are retained. If you are viewing details of this package through the Expense Summary pages, you can see expenditure information for all components within the package period—regardless of whether they were before or after the effective-dated change. This enables you to see a complete history of the package, including the detail changes.

All of the package and component details default from the previous package, except for components that had an end date earlier than the effective date of the current package. Now you can change any of the component details, including the component dates, or add new components to fit your needs.

The Base Components and Base Comp (Per) pages include a carry forward (C/F) amount C/F TPV/TEC that you use to ensure the accuracy of the package values when making effective-dated changes to the package. The adjustment amount ensures that the package total is correct, regardless of the timing and the type of effective-dated changes to the package.

The carry forward amount is important if you have used the budget capabilities to calculate the expected expenditure of components. The amount represents the difference between the prorated value of the package (up to the effective date of the change) and the budgeted value of the package for the period.

For example, you package a component that represents an employee's bonus payment. The calculated value of the component is 10,000 AUD. You know that you pay bonuses only once a year in February. When budgeting this component, you can identify that the 10,000 AUD is attributable to the February pay period. To ensure data integrity, you must ensure that the amount budgeted and the component value are equal.

When you define the budget, it has no effect on the expenditure of the component. Expenditure is controlled through the payroll enrolments (which assume a regular rate of expenditure) and any overrides done through payroll.

If you then make an effective-dated change to the package, recognize the budget you have set and adjust the package values accordingly.

For example, an employee has a package that is effective for a year, from July 7, 2000, to June 6, 2001. The package was modelled from the top down with the Total Employment Cost (TEC) set to 120,000 AUD. The Total Package Value (TPV) was calculated to be 85,000 AUD.

Without budgeting, you would have assumed a regular rate of expenditure of 10,000 AUD per month, based on the TEC of 120,000 AUD. In this situation, any effective-dated change that is made two months into the package would assume 20,000 AUD has been expended and calculate the package values accordingly. This means that for the remainder of the package, the employee has 100,000 AUD left to expend.

By using budgeting, you can ensure that the package better reflects the real world. Because of putting money aside for holidays, bonuses paid only annually, and any other possible variables, it is likely that the rate of expenditure will be irregular. In the real world, it may be that 75,000 AUD of the TEC is budgeted in the first six months of the package and 45,000 AUD in the last six months.

In this situation, it is necessary to adjust the package value to reflect any irregularities in expenditure.

Taking the example a little further, we created a package with values of 120,000 AUD TEC and 85,000 AUD TPV. We budgeted to spend 75,000 AUD evenly over the first six months and 45,000 AUD in the last six months. We make an effective-dated change to the package after two months. This change does not alter the TEC or the TPV but rather modifies various component details. Based on the budget, we want the employee to spend only 95,000 AUD over the remaining 10 months of the package. This is because the employee was budgeted to have spent 25,000 AUD in the first two months.

When calculating the package values, we need to adjust the package by 5,000 AUD. This amount is the difference between the prorated value of the package (up to the effective date of the change) and the budgeted value of the package for the period.

Here is the calculation of the prorated value of the example package:

120,000 AUD/ 12 (months in year) x 2 (months elapsed) = 20,000 AUD

The budgeted value of the package for the period is 25,000 AUD (assuming a regular rate of expenditure on the 75,000 AUD budgeted in the first six months). This value is extracted from the details stored against the package.

The difference between the two is 5,000 AUD. This value represents the amount of the package that was budgeted before it would have been entitled, or in arrears if the package was budgeted to spend less early in the year and spend more later in the year. This amount can be seen as the carry forward amount (C/F TPV/TEC) on the effective-dated change to the package.