2012 R3 CU8: Premium Earning Generation

This is the third post in a series related to the new functionality introduced in Dynamics AX 2012 R3 CU8. Several new features were added in the HR and Payroll areas based on customer feedback. Features to be covered in the series include: Total compensation statement, FMLA tracking, Premium earning generation, Regular rate of pay, Benefit accrual enhancements, and Forecast position enhancements. Be sure to subscribe to updates for our blog to learn about this new functionality

Premium Earnings Generation

Premium earnings refers to non-recurring earnings that are added to a worker's earning statement due to certain conditions being met. For example, a company may want to provide Longevity pay of 3% of regular pay each pay period to employees who have been there for more than 10 years. Another example would be shift differentials where a company pays $2 more per hour to employees who work a given shift.

The new Premium Earnings Generation feature provides a way for you to automate adding premium earning lines to your employee’s earnings statements based on specific rules that you define.

Create Premium Earnings Policy

The premium earning policy stores the rules that are used to determine whether premium earning lines should be created on an earnings statement. It is only necessary to create a single policy to store all rules. The steps for creating a premium earnings policy are as follows:

1. Open the premium earnings policy form by going to Payroll > Setup > Earnings > Premium earning policies
2. Click Parameters, select “Companies” from the Organization types list and click Add to move it to the Order of Preference list.
3. Click Policy in the New group on the action pane and enter the following:
   1. Name: Premium Earnings
   2. Description: Premium earnings policy for the company
4. Open the Policy organizations fast tab and move all of the companies listed in the Available organization nodes to the Selected organization nodes list
   (Note: If you have many company specific rules, you can also create separate policies for each of your companies by following steps 3 and 4 for each company to segregate the policy administration)

Create Policy Rule Types and Rules

After the policy has been created, can add rules to it. The rules will be exercised when you run the premium earnings generation tool. The rules determine if and when a premium earning line is added to an earnings statement. Creating rules is a two-step process. First, you must create rule types. Once created, the rule types are listed in the policy. The steps for creating rule types are as follows:

1. Open the rule types form by going to Payroll > Setup > Earnings > Premium earning policy rule types
2. Click New to create a new rule type. For example, you may want to add a shift differential premium every time an employee works the night shift. To do so, enter a rule type as follows:
   1. Rule name: Night Shift
   2. Description: Night Shift
   3. Query name: Premium earnings
   4. Document type: Earnings statement
      (Note: the only Query name and Document type selections are Premium earnings and Earnings statement.       This is intentional.)
3. Close the Premium earnings rule type form.
   

The second step is to create the actual rules for each rule type. The steps for creating rules are as follows:

1. Open the Premium earnings policy by going to Payroll > Setup > Earnings > Premium earning policies
2. Open the Policy rules fast tab. Any policy rule types you created will be listed.
   (Tip: the number listed in parenthesis next to the rule type name indicate how many rules are currently associated to the rule type)
3. Click on a rule type. For example – the Night Shift rule type created earlier.
4. Click Create policy rule (the green “+” sign in the rule grid).  
5. Create a rule as follows:
   1. Effective date: 1/1/2010 (i.e. the date the rule became effective)
   2. Expiration date: Never (i.e. the date the rule expires)
   3. Edit condition: This is the actual rule. Using the expression builder, select fields from the field list and set their values. For example, to create a rule that only applies to employee’s who have a “Worker type” of “Employee”, use the following path:
      Earnings statement line.Earnings date >
      Additional >
      Earnings statement line >
      Earnings statement >
      Worker >
      Worker employment >
      Worker employment.Worker type = Employee

 An example of a rule for creating a Shift differential for employees who work the night shift might look as follows:

Create a Premium Code

Now that the policy and rules have been created, you can create a Premium code. The premium code is the connection between the rule and the earning code that gets created when the result of exercising the rule is true. The steps for creating a premium code are as follows:

1. Open an Premium codes form by going to Payroll > Setup > Earnings > Premium codes
2. Click New to create a Premium code. For example, to create a Night Shift premium code, enter the following:

1. Premium code: Night Shift
2. Description: Night Shift
3. Premium earning policy rule type: Night Shift (i.e. select the rule type for the rule that applies to this premium code)
4. Payout basis: Earning line (see explanation below*)
5. Earning code: Shift Differential (i.e. what earing code line should be created)
6. Payroll calculation frequency: All (i.e. which pay periods does this premium code apply to)
   

• Open the Active interval tab and enter the various time periods in which this Premium code is active.
  (Note: Premium codes like Bonuses may only be active during certain time periods each year. Use the Active intervals to manage these)

*Payout basis – the payout basis is what determines how any resulting earnings statement lines are created. The choices are:

Generate Premium Earning Lines

The premium earnings generation tool is designed to be run after earnings statements for a given pay period have been created. It eliminates the need to manually open and modify every earning statement where an employee may be owed some sort of premium pay. When the premium earning generation tool runs, it does the following:    

1. Evaluates a line in an earnings statement against the rule linked to the premium code.
2. If the rule is:

1. False (i.e. the line does not pass the rule), then it moves to the next line and goes back to step 1.
2. True (i.e. the line passes), go to step 3

• If the premium code payout basis = Earnings line, then:

1. A line is added to the earnings statement using the earning date of the evaluated line and the earning code linked to the premium code.
2. Moves to the next line.
3. Go to step 1.

• If the premium code payout basis = Earnings statement, then:

1. A line is added to the earnings statement using the pay period end date and the earning code linked to the premium code.
2. Moves to the next Earnings statement
3. Go to step 1.

 To use the Premium earnings generation tool:

1. Open the Premium earnings generation tool by going to Payroll > Periodic > Earnings statement processing >Generate premium earnings
2. Select a Pay cycle and period
3. Set any other filtering as desired
4. Click OK to start processing
   

 The Premium earnings generation tool can also be run for a single earnings statement as follows:

1. Open the list of earnings statements by going to Payroll > Common > Earnings statements > Earnings statements
2. Select an earnings statement and open it
3. Click Premium earnings in the Generate group on the action pane at the top
   

Sample Results

In the following example, the employee has a bi-weekly earnings statement with earning lines for each workday in the period. Three of the ten workdays he worked the night shift and the other seven he worked his regular day shift. His earnings statement looks as follows:
 

Premium earnings were set up for a Bonus with a payout basis of “earnings statement” and a Night Shift with a payout basis of “earning line.” The Bonus rule says that it is paid to employees with a worker type = Employee and only on the first full pay period of the calendar year. The Night Shift rule says a Shift Differential of $25 is paid each time the night shift worked.

After running the Premium earnings generation tool on his earnings statement, the result is as follows:
 

In addition, in the line details tab, each line created by the Premium earnings generation tool is tagged as follows:

1. Source: Premium (to identify that the premium earnings generation tool created the line)
2. Premium code: Name of the Premium code that created the line

For example:
 

Summary

This new capability to set up Premium earnings codes and payout rules, adds a powerful tool to your payroll processing capabilities. It not only speeds up earnings statement generation but also significantly reduces errors and ensures your employees are paid properly.