Salary Commitment (Encumbrance)

"A salary commitment is a calculation against salary to predict future funding needs on the assigned accounts for a given period of time typically to the end of an appointment or end of an accounting period.

Financial account managers need to compare costs to budget. By adding together period-to-date actual costs and anticipated/predicted expenses they have a budgeting devise to stay within their allocation. The salary encumbrance process calculates costs by individual that will be charged to accounts from a given point in time though a given point in time (represents the anticipated/predicted costs). Assumptions are made in predicting costs to arrive at the best estimates such as end of period being fiscal year end if not otherwise noted or same pay rate unless otherwise noted. Calculations should closely represent what each would receive in pay provided no transactions change the compensation amount or changes their appointment status."

Salary Commitment Calculation

Salary commitments are calculated for every eligible employee at the end of each pay run in which the employee is paid (i.e., semimonthly vs. biweekly payrolls). Commitment data is forwarded to the Kuali Financial System (KFS) Labor Ledger and General Ledger system and to the Kuali Data Warehouse (KDW) for the employees processed in each Workday pay run.

• Commitments are calculated for all employees except for temporary employees and undergraduate students.
• Commitment accounts are taken from the employee's Workday Costing Allocations as of the last day of the next pay period following the current pay run.
• Commitments are not calculated for non-operating accounts (accounts with fund codes such as X1X and X2X).

The calculation process counts the number of pay periods between the beginning of the next pay period up to and including the end date of the encumbrance period. The end date is either:

1. the account end date (if no end date, use the end of the fiscal year), or
2. the employee's job termination date, or
3. the end of the Payroll pay calendar, whichever comes first.

A code is stored in the encumbrance record to reflect which of the three dates was used.

The amount of the commitment is the number of payrolls multiplied by the employee's periodic earnings (compensation rate normalized to the pay period) with an adjustment for partial pay periods at the end of the commitment period.  

Each new commitment value overlays the previous value in the Labor Ledger and General Ledger records. (The previous encumbrances are reversed (credited), and the new ones are processed as debits.)

Year-End Special Considerations

Our practice has been to calculate no new encumbrances with the last pay period of the fiscal year (both biweekly and semimonthly), and to process only the dis-encumbrances for the previous pay run. This effectively sets all encumbrance balances to zero at year end. In the first pay run of the new fiscal year, we will create all new encumbrances, and have no old ones to reverse.