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Question

How does Dilution work in a leap year, with 366 days?

Solution

Unanet dilution allows for reporting on accurate costs for fixed-pay/salaried/exempt employees who are reporting all their hours, including hours above 40/week. If the person receives $50,000/year in a non-leap year, they should also get $50,000 in a leap year. (You don't pay them for an extra day on leap years.) That means that Unanet will, in normal usage, calculate the hourly cost rate so that if you add up all of the hours worked (regardless of how many that ends up being), it will be $50,000. 

The person rates in the Unanet person profile should be their salary/2080 (business hours in year) whether leap year or non-leap year. It should be entered in as much precision as we allow (###.#####), going to five (5) places after the decimal. This allows Unanet to calculate the values to align as closely as possible to the payroll or accounting system.

No additional rate calculation or rate entry on the Person Profile Rates tab is required, since the person gets paid the same amount (2083.33or 50K/24 periods) every semi-monthly period, no matter how many hours they worked or how many hours are in the semimonthly period. Another example is that while the second half of January is longer than the second half of June, the person is paid the same. The same goes for the second half of January and the second half of February.


Example:

John makes $50,000/year, so his Unanet cost rate in his Person Profile is $24.03846 (50000/2080). 

In a 2080 hour year:

Hours Worked Effective rate

Total Yearly $


2080

24.03846 = ((2080/2080) * 24.03846)

Rate is same as profile cost rate, since person worked exactly 2080 hours (unlikely)

$49.999.99 = (2080 * 24.03846)
2040

24.50980 = ((2080/2040) * 24.03846)

Rate is higher because hours worked are less than expected

$49,999.99 = (2040 * 24.50980)


2110

23.69668 = ((2080/2110) * 24.03846)

Rate is lower because hours worked are more than expected

$49,999.99 = (2110 * 23.69668)


If you based his Unanet cost rate in the Person Profile on 2088 (business hours in a leap year), on the other hand, (which you do not need to do, but just for the purposes of excercise here) you would get $23.94636 (50000/2088). 

Now assuming he works a set number of hours, the difference, If leap year was calculated differently (which again, it does not need to be), would be:

2088 hour year:

Hours Worked Effective rate

 Total Yearly $$


2088

23.94636 = ((2088/2088) * 23.94636 )

Rate is same as profile cost rate, since person worked exactly 2088 hours (unlikely)

$49.999.99 = (2088 * 23.94636)
2040

24.50980 = ((2088/2040) * 23.94636)

Rate is higher because hours worked are less than expected

$49,999.99 = (2040 * 24.50980)

2110

23.69668 = ((2088/2110) * 23.94636)

Rate is lower because hours worked are more than expected

$49,999.99 = (2110 * 23.69668)


You can see that since both sides of the equation changed equally, the resulting cost rate is the same. Assuming that the user in the example (John) should be paid $50,000 in a leap year instead of $50,192.30 (which includes 1 day's pay for the extra day) - then no changes need to be made because the user will be paid $50,000 whether the year is a leap year or not.


In other words, no additional rate calculation or rate entry on the Person Profile Rates tab is required, since the person gets paid the same amount (2083.33) every semi-monthly period, no matter how many hours they worked or how many hours are in the semimonthly period. Another example is that while the second half of January is longer than the second half of June, the person is paid the same. The same goes for the second half of January and the second half of February.

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