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Title: Dilution Examples

Brief description:

This page covers some examples of dilution. Consult the Help Docs for more specifics on dilution calculations related to Business Hours Factor, Pay Codes, and various Styles of Dilution. Note that you may choose to exclude some Pay Codes from Dilution. 


What’s covered in this document:

Dilution Styles Explained

Style 0: No Dilution of Rate: In Style "0" the hourly rate is a constant and the gross labor cost is variable; the effective (diluted) hourly rate always stays the same as the labor cost rate.

Style 1: Dilution Occurs Up and Down: In Style "1" the gross labor cost is constant and the effective (diluted) hourly rate is variable based on the total hours worked.

Style 2: Dilution Only Occurs Down: In Style "2" the effective (diluted) hourly rate is constant if hours worked are at or below expected hours, the effective (diluted) hourly rate is variable (decreases) if the hours worked are above expected ; the gross labor cost is capped at Not to Exceed the salary equivalent.


Weekly time period, Dilution Styles 0 - 2

Person cost rate: $100

Weekly time period: 40 hours expected

Weekly pay: $4000

Labor cost calculated in the table below:

Hours Worked

Style 0 - No Dilution

Style 1 - Dilutes Up and Down

Style 2 - Dilutes Down Only

10

$1,000

Diluted rate: N/A

$4,000

Diluted rate: $400

$1,000

Diluted rate: N/A

40

$4,000

Diluted rate: N/A

$4,000

Diluted rate: $100

$4,000

Diluted rate: N/A

50

$5,000

Diluted rate: N/A

$4,000

Diluted rate: $80

$4,000

Diluted rate: $80

Semi-monthly time period, Dilution Styles 0 - 2 

Exempt user, cost rate: $100

Semi-monthly time period ; 86.6667 hours expected

Annual Salary = $208,000

Semi Monthly Pay = $8666.67

Labor cost calculated in the table below:

Hours Worked

Style 0 - No Dilution

Style 1 - Dilutes Up and Down

Style 2 - Dilutes Down Only

60

$6,000

Diluted rate: N/A

$8,666.67

Diluted rate: $144.45

 $6,000

Diluted rate: N/A

80

$8,000

Diluted rate: N/A

$8,666.67

Diluted rate: $108.33

$8,000

Diluted rate: N/A

88

$8,800

Diluted rate: N/A

$8,666.67

Diluted rate: $98.48

$8,666.67

Diluted rate: $98.48

100

$10,000

Diluted rate: N/A

$8,666.67

Diluted rate: $86.67

$8,666.67

Diluted rate: $86.67

Semi-monthly time period, Dilution Style 1 

Below is an example of a Salaried employee and semimonthly dilution using Style 1 Dilution. This example has a little more detail on how the calculations are being made. 

Exempt user, cost rate: $38.46

Semi-monthly time period ; 86.6667 hours expected

Annual Salary = $80,000

Semi Monthly Pay = $3,333.33

Labor cost calculated in the table below:


Person's annual salary: $80,000.00



Semimonthly pay:  $3,333.33
(annual salary/24)




Derived Hourly Cost rate:  $38.46153
(annual salary/2080)

When Dilution is ON, it uses a dilution factor of 86.6667 for every semimonthly period 




Example scenario:

First half of January has 11 business days

88 hours (11 * 8) 

 




If Dilution is ON:Semi-monthly Pay
If they work 88 hours, they are paid:$3333.33

Dilution factor = pay period hours (86.6667)/hours reported (88) or  0.9848488636363636.

Then Effective cost rate = hourly cost rate (38.46153) * dilution  factor (0.9848488636363636)  or 37.8787941142159.   



37.8787941142159 * 88 hours = 3333.333882051



Another way to calculate could find the Effective Cost Rate by taking the semi-monthly pay divided by hours in specific period, or $3333.33/88 = $37.87875, which is the Effective Cost Rate.

And $37.87875 * 88hrs = their semi-monthly pay.




If they work 100 hours, they are paid:$3333.33

Dilution factor = pay period hours (86.6667)/hours reported (100) or 0.866667.

Then Effective cost rate = hourly cost rate (38.46153) * dilution  factor (0.866667)  or 33.33333882051.   



33.33333882051 * 100 hours = 3333.333882051


Another way to calculate could find the Effective Cost Rate by taking the semi-monthly pay divided by hours in specific period, or $3333.33/100 = $33.33, which is the Effective Cost Rate.

And $33.33 * 100hrs = their semi-monthly pay.

If they work 70 hours, they are paid: $3333.33Dilution factor = pay period hours (86.6667)/hours reported (70) or 1.238095714285714. Then Effective cost rate = hourly cost rate (38.46153) * dilution factor (1.238095714285714)  or 47.61905545787143.   


47.61905545787143 * 70 hours = 3333.333882051


Another way to calculate could find the Effective Cost Rate by taking the semi-monthly pay divided by hours in specific period, or $3333.33/70 = $47.619, which is the Effective Cost Rate.

And $47.619 * 70hrs = their semi-monthly pay.

If Dilution is OFF:Semi-monthly Pay
If they work 88 hours, they are paid:$3384.61

Hours * Person Profile Cost rate

This would be wrong, since they are salaried and should be paid $3333.33. Any project cost allocations would also be incorrect.

If they work 100 hours, they are paid:$3846.15

Hours * Person Profile Cost rate

This would be wrong, since they are salaried and should be paid $3333.33. Any project cost allocations would also be incorrect.

If they work 70 hours, they are paid: $2692.31

Hours * Person Profile Cost rate

This would be wrong, since they are salaried and should be paid $3333.33. Any project cost allocations would also be incorrect.



Additional Information

Help Docs - Dilution

Help Docs - Pay Codes

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