Title: Dilution and Partial Periods - Leave Without Pay (LWOP) - Percentage of Period Pay
When you hire or terminate an exempt employee mid-time period, or when an exempt employee has uncompensated leave within a period, then by default, Unanet dilution will adjust the employee’s cost rate based on the hours worked against the hours in the time period. Without taking steps, this would result in an inflated cost rate for that individual. This document describes the process for charging Partial Periods or LWOP and calculating the correct pay in the period as a percentage of the period worked.
Note: This method works when an exempt employee is paid a percentage of their salary based on the hours worked over the business hours in the period. Note that some organizations instead pay the exempt employee’s straight hourly rate when partial periods are worked; if that is your intent, please refer to the Quick Topic - Dilution and partial periods (Straight Pay) for the configuration of the straight pay method of compensation.
As of Unanet 10.2, the Unanet Pay Code Setup allows for a Exempt Usage selection option of "Leave Without Pay". This results in that time having zero cost and being excluded from Dilution calculations. This can also be used for Partial Period pay such as that for New or Terminating hires.
Additionally, a property, "Set Dilution Business Hours in Period from Dilution Hours", is available for more accurate calculations on semi-monthly or monthly periods. The dilution calculations have been modified to include a Business Hours Factor to more accurately weight excluded hours in semi-monthly and monthly time periods. If this property is not used, the legacy calculations for Partial Periods or LWOP may result in overpaying or underpaying an employee.
What’s covered in this document:
Pay Code Setup
No matter your time period (weekly/biweekly or semi-monthly/monthly), you will create the special Pay Code. You'll do this in Admin - Setup - Pay Codes as outlined below.
Set the "Exempt Usage" field to "Leave Without Pay". The Cost Rate Factor will defaulted to 0.
Name it appropriately, as desired. For LWOP you may choose "LWOP" and for partial period new or terminating hire you may choose something like "PARTIALPD"
NOTE: If you change Exempt Usage settings in Admin - Setup - Pay Codes after time has already been charged, then the Person Dilution recalculation button may not recalculate as expected. Options include:
- A script can be run. Contact Unanet Support for assistance with a correcting script that will remove the cost from time marked as to that paycode.
- Adjustments may be imported to negate the hours on the paycode and then add them back in again.
Associate the New Pay Code with its Own Project
Create a new internal project and ensure that the new pay code is the only project which may be charged to it.
Admin Property Set Dilution Business Hours in Period from Dilution Hours
Note that the property may be turned on by default which maintains legacy behavior. If the property is turned off (activating the new functionality), then Dilution Business Hours in Period will be based upon the Person's Business Week hours. For example, if in a system with semi-monthly timesheets the property is turned off, then the Dilution Business Hours in Period would be 88 or 96, or however many actual business hours that person has for that period.
Weekly/Bi-Weekly Usage of Property
For weekly/biweekly usage, you will likely not need this property. If you do turn it off (activating the new functionality), and if the person is on a 40 hour business week, there will be no impact. If instead if the person has a business week other than 40 hours/ week, it will impact dilution calculations. (If you have part time salaried people, you may instead want to enable the "Use Business Week Hours For Dilution" property.)
Semi-Monthly Usage of Property
For semi-monthly usage, you will likely want to turn this property off if you want to account for varying business days in semi-monthly periods. Turning the property off activates the new functionality to use Business Week hours for Dilution Hours.
Important Note About Properties
Do not confuse the two similar but very different properties of "Set Dilution Business Hours in Period from Dilution Hours" and "Use Business Week Hours For Dilution". This page primarily addresses the former, while the latter may be read about in detail via the link here.
Charging Time and Possible VSP (Validation Stored Procedure)
The user will charge their worked hours to the appropriate project, and then 8 hours per day to any days where LWOP is taken.
Note: People charging LWOP should charge their time in full day blocks (depending on Business Week definition - typically 8 hours but might be 10 or other for different Business Week definitions). Charging more or less than full day blocks of LWOP will affect the calculations of the person's pay. Consult the FLSA requirements for more details: https://www.dol.gov/whd/flsa/ On this note, you may wish to implement a VSP (Validation Stored Procedure) to require that people can only enter time in full day blocks of hours.
Sample Semi-Monthly Calculations When Set Business Hours in Period from Dilution Hours Property is Turned Off (new functionality activated)
Dilution Business Hours in Period value
When the Set Business Hours in Period from Dilution Hours property is turned off, the Dilution Business Hours in Period is derived from the semi-monthly business hours. This might be 72, 80, 88, 96, 104, etc.
The screenshot below shows in red how the Business Hours in Period will set when the property is off, and in blue how the Business Hours in Period will set when the property is on (legacy behavior).
The Business Hours Factor is used to weight the number of business hours in the semi-monthly period.
The Business Hours Factor is used to calculate the Cost Rate Factor (also known as Dilution Factor), which is then multiplied against the person's cost rate to derive the effective cost rate.
The Business Hours Factor and Cost Rate Factor will be identical if:
- if the new property is off (new functionality) and hours charged in the timesheet equal hours in the period (88 hours charged and 88 hours in period)
- if the new property is on (legacy behavior)
The Help documentation on Dilution outlines in detail the calculations. Below is an example of application of the calculations.
Per the Help, The Dilution Factor (Cost Rate Factor on the Person Dilution screen) is calculated as:
Dilution Hours - (Business Hours Factor * (Hours Charged to (Undiluted) & LWOP pay codes) )
Hours Charge to (Diluted) pay codes
Example of Semi-Monthly Calculations
Let's take the example of Hannah Storm.
- Hannah has:
- an annual salary of $124,999.92
- a semi-monthly salary of $5,208.33
- a derived hourly cost rate of $60.09611 cost rate
- In an 88 hour semi-monthly period, Hannah has worked 3 days and taken LWOP for the remaining 8 days.
Unanet aside, the typical formula for pay in a period where LWOP was charged would be: days worked/days in period * period salary.
Using the example of Hannah above, that would be: 3 worked days/11 business days in period * $5,208.33 period salary = $1,420.45
Note that it typically does not matter how many hours are worked in the days worked, since the person is salaried. If they worked 8 hours/day for the 3 days, or if they worked 11 hours/day for the 3 days, typically they would be paid the portion of their period pay which represents the days worked (in this case, $1,420.45).
Now let's take a look at how Unanet arrives at that same calculation.
Charging hours in the period that exactly match the business hours in the period (e.g. charging 88 hours in an 88 hour period)
In an 88 hour period, if Hannah works 24 hours and charges 64 hours of LWOP, then as outlined above, her pay should be $1,420.45. Let's take a look at how Unanet arrives at this value:
Note that there are 88 business hours in the period and Hannah has also charged 88 hours.
Unanet performs the following calculations:
- Business Hours Factor: Dilution Hours/Business Hours: 86.6667/88 = 0.9848488636363636
- Dilution Factor (Cost Rate Factor): Formula from Help, above: 86.6667 - (0.984848863636 * 64) // 24 = 23.63637272 /24 = 0.9848488636373333
- Note that in this example, where the hours entered in the timesheet (88) equal the total business hours in the timesheet (88), that the Business Hours Factor equals the Cost Rate Factor.
- Effective Cost Rate: This is the Dilution Factor (Cost Rate Factor) multiplied by the Person Profile Cost Rate, or $59.1856
- Pay for the period: Effective Cost Rate * Hours worked = $59.1856 * 24 = $1,420.45
Charging hours in the period that differ from the business hours in the period (e.g., charging 97 hours in an 88 hour period)
In an 88 hour period, if Hannah now works 33 hours (11 per day instead of 8 per day) and still charges 64 hours of LWOP, then as outlined above her pay should still be $1,420.45. Let's take a look at how Unanet arrives at this value:
Note that there are 88 hours in the period and Hannah has charged 97 hours.
Unanet performs the following calculations:
- Business Hours Factor: Dilution Hours / Business Hours: 86.6667/88 = 0.9848488636363636 (same as when she worked 24 hours instead of 33 hours)
- Dilution Factor (Cost Rate Factor): Formula from Help, above: 86.6667 - (0.984848863636 * 64) // 33 = 23.63637272 /33 = 0.7162537190089697
- Note that in this example where the hours entered in the timesheet differ from the total business hours in the timesheet, that the Business Hours Factor is different from the Cost Rate Factor.
- Effective Cost Rate: This is the Dilution Factor multiplied by the Person Profile Cost Rate, 0.7162537190089697 * $60.09611, or $43.04406
- Pay for the period: Effective Cost Rate * Hours worked = $43.04406 * 33 = $1,420.45
Sample Semi-Monthly Calculations When Set Business Hours in Period from Dilution Hours Property is Turned On (legacy functionality)
For examples of how the system will calculate LWOP when the property "Set Business Hours in Period from Dilution Hours" is turned On (legacy functionality), see LWOP - Sample Legacy Calculations.
Note: The linked page outlines legacy behavior and is not recommended.
Legacy Behavior in Migrated Systems
Systems that migrated from versions of Unanet prior to 10.2 will be migrated to have the property turned On, which maintains the legacy behavior. Migrated systems may have already employed legacy workarounds that address the legacy behavior, so keep this in mind if you consider activating the new functionality by turning the property off.
4-10 Work Weeks
Some companies have their employees work a 4-10 schedule, where they work four days of 10 hours per week and have a three day weekend every week. This section addresses how the charging and calculations will work.
The first screenshot below is an outline of Admin > Setup > People > Business Week which shows a setup of the 4-10 schedule. Note that some companies may instead or also use a Tuesday to Friday schedule instead of a Monday to Thursday schedule.
This Business Week would then be associated in the Person Profile of the appropriate employees.
With 4-10 workweeks, when the Set Dilution Business Hours in Period from Dilution Hours property is off/unchecked (new functionality enabled), then:
- If Friday is the day off, and the person only ever works Mon-Thurs, then Friday should be treated just like a weekend.* The person will not charge vacation or LWOP on Fridays*
- Time off should be entered in the full day amounts that are prescribed in the business week (10 hours in the case of 4-10)
- The time should be prorated based on a percentage of the period (days in the period), not hours against an average semimonthly amount (16/86.6667 does not make sense, since 16 represents a smaller or greater percentage in periods that vary in length)
- Unanet looks at the hours in the Business Week set up in order to determine Dilution Business Hours in Period. For example, in a period that has 7 business days as in the first screenshot below (Thurs, Mon/Tues/Wed/Thurs, Mon/Tues), then Unanet will take those 7 days and multiply by the 10 hours specified in the Business Week hours.
*Note some 4-10 work weeks are Tues-Friday in which case Monday would be treated like a weekend instead of Friday above.
If we look at two examples:
- EXAMPLE 1: In a period with 7 work days as in the first screenshot below, where the person worked 5 of the days and took 2 days LWOP (first screenshot), they should be paid for 5/7 days or 71% of their regular period pay.
- 0.7142857142857143 * normal semimonthly pay of $2,291.67, which is $1,636.91.
- Unanet also calculates this as in the second screenshot below.
- EXAMPLE 2: If a period with 9 work days as in the third screenshot below, where the person also took 2 days LWOP and worked 7 days, they should be paid for 7/9 days or 77% of their regular period pay.
- 0.7777777777777778 * $2,291.67 = $1,782.41.
- Unanet calculates this as well (4th screenshot below).