Examples of Balance Adjustments

Let's look at some examples of when and how you can review run results and adjust balances.

Scenario 1: Correct entries from the Load Initial Balances process

Vision Corp has acquired a company and it has hired a group of employees mid-year through this acquisition. After the acquisition, you have enrolled them into the payroll of Vision Corp.

After you have hired the employees and before you begin processing their payroll, you must use the Balance Initialization process to load their initial balance values. This ensures the earnings and taxes are accurate for the entire year and not just the period they worked for Vision Corp. The Balance Initialization process can result in the following:

• Incorrect Amounts

  For example, after the first payroll run for your new employees, you realize that you initialized the FIT Withheld balance for an employee less than 100. Use the Adjust Individual Balances task to adjust the balance. Use the payroll element that feeds the FIT Withheld balance while making the adjustments.

• Incorrect Tax Dimensions or Incorrect Tax Jurisdictions

  After the first payroll run for your new employees, you realize that you initialized the balance for a new employee with an incorrect tax jurisdiction or an incorrect tax dimension.

  You must replace the balance initialization run result with the incorrect balance dimension or incorrect tax jurisdiction contexts, with these two balance adjustment run results.

  1. One with the correct contexts for the same worker, dates, and amount; and,

  2. The other to negate the original run result by a run result with the incorrect contexts and the negative amount for the same worker and dates.

• Omissions in Balance Initialization

  For example, after the first payroll run, you realize that an employee was omitted from the balance initialization process and none of the employee’s balances were loaded. You must then make a balance adjustment to include the employee’s details in the payroll of Vision Corp.

• Unwanted Balance Initialization

  After the first payroll run, you realize that you incorrectly entered an employee’s tax jurisdiction as California instead of Texas. Texas doesn’t have State Income Tax (SIT) and hence you must credit the SIT for California that was deducted from the employee through a balance adjustment.

These balance adjustments are not paid as the necessary payment was done by the original company before the actual acquisition. You might have to do the costing to report and account for the earnings, taxes, and payments made.

Scenario 2: Third-party gross-to-net calculations

Some companies use third party agencies to handle certain earnings such as disability payments or stock option payouts. Although such earnings are calculated by a third-party, the employer must report them. Use balance adjustments to import the incremental values of the earnings calculated and withheld by a third-party. Such balance adjustments are costed but not paid as the third-party has already paid it.

Scenario 3: Retrospective changes that aren’t covered by retroactive pay

Generally, you use the Retroactive Pay process to accommodate retrospective changes that impact payroll run results. The retroactive pay process creates retroactive element entries for the difference between what was calculated and what should have been calculated after applying the retrospective change. The

next payroll run accommodates this difference.

However, not all elements support retroactive pay, and hence you must use the balance adjustments to adjust the retrospective changes. For example, Tax Deductions are not enabled for retroactive pay.