Retroactive Earning Generation

Recently the Dynamics AX HCM team release a couple of new enhancement for Payroll in Dynamics AX 2012 R2. The enhancements add the support for retroactive earning generation and zero earning pay statements. These enhancements were delivered as part of KB2978309 which you can obtain from LCS. These features will be made available for the Dynamics AX R3 release as part of CU8 which is coming later this fall. This post covers the retroactive earning generation functionality, a later post will cover the zero earning pay statement portion of the update.

Retroactive Earning Generation

Have you ever had the need to increase an employee's rate of pay historically and automatically recalculate wages that have already been paid to account for the newly increased rate? Well now you can accomplish this by setting up and running the Retroactive Earning Generation process from within Payroll. Below are steps how to setup and process retroactive earnings.

Setup

In order to retroactively adjust existing earnings you must configure your earning codes. Each earning code must have a secondary earning code for paying out retroactive pay for that earning code. For example, if you have an earning code of Regular which represents all of your standard base pay, you will need a secondary earning code to pay out the adjustment. Retroactive earning generation does not use the same earning code as the originally paid earnings. Once you create this secondary earning code you will then select the existing base earning code and associate the new retroactive earning code to it.

TIPS:

• It is perfectly acceptable to link a single retroactive earning code to multiple base earning codes. Doing so will payout all adjustments under the same earning code. All the same reasons you would want separate base earning codes to begin with apply though. So if you need retroactive adjustments to be reported differently, post to the GL differently and so forth, you will want to maintain a 1:1 relationship between your base earning codes and your retroactive earning codes.
• Base earning codes without an associated retroactive earning code will never be retroactively adjusted, and are essentially turned off for retroactive earning generation.

NOTE FOR SALARIED POSITIONS/WORKERS: Earning statement lines create based on the salary functionality do not follow this same behavior. New lines are created using the original earning code. The Retroactive earning generation process simply recalculates the entire pay period salary for the worker/position and compares that to the existing salary paid to determine if an adjustment is needed. Because of this, historical pay rates cannot take place in the middle of a pay period for salaried positions/workers, and must go into effect on the start date of a pay period. Non-salaried positions/workers are able to support a mid-pay period change.

Below are the steps to create the retroactive earning code and associate it to the existing one. The naming is simply an example, your codes and names will likely be different.

Create the secondary Retroactive Earning Code

1. Open the earning code form by going to Payroll > Setup > Earnings > Earning codes (note the new menu structure, earning codes have been put into their own folder).
2. Create a new Earning code by clicking the New button. Set

1. Earning code: Regular Retro
2. Description: Regular adjustment
3. Include in payment run type: Primary and additional (you will likely want to select this option to allow the adjustment to be paid out in either the primary pay statement or an additional pay statement.)
4. Base earning component: Marked
5. Retroactive earning: Marked (Note the message indicating several other fields will be defaulted and disable for you) This is the key setting for configuring this new code to apply the retroactive calculation.
6. Tax method: Supplemental
7. Fringe benefit type: Not applicable
8. Base definition: Not applicable
9. For all other fields you will set them up as needed in the same way you would for any other earning code

Associate the new Retroactive Earning Code to the Base Earning Code

1. Open the earning code form by going to Payroll > Setup > Earnings > Earning codes
2. Select the earning code that you want to enable for retroactive adjustments
3. In the Retroactive earning code field, select the code you created above, in this case Regular Retro

That's it! You have now configured your existing earning codes for retroactive adjustments.

Generating Retroactive Earnings

The Retroactive Earning Generation process essentially recalculates all existing earning lines that meet the process selection criteria and recalculates the rate column. If the recalculated rate is higher than the original line's rate then a new Earning Statement Line is created based on the original line, but with the retroactive earning code that is setup for the original earning code. The new line will have an earning date the same as the original line and the new line will also be found on the same earning statement. Since in most cases the accounting period of the original earning statement lines is likely closed you must specify the accounting date for the new line to allow it to post to the GL in the appropriate open period. This is done from the generation dialog.

Prior to running the earning generation process you must make a historically date effective change to one of the following places (depending on the position, worker or original earning code's setup):

• Employee's fixed compensation
• Worker earning codes (worker form)
• Earning code rate or multiplier

This step is not covered in the detailed generation steps below.

NOTE: Retroactive earnings is supported for any earnings where the unit of measure is either Hours or Piece. Retroactive adjustments of earning codes with a Unit of measure of Each are not supported.

Generating Retroactive earnings

1. Prior to this you must make the historically date effective change as noted above.
2. Go to Payroll > Periodic > Earnings statement processing > Retroactive earnings > Generate retroactive earnings

1. Select the Pay cycle that you want to process
2. In the Start date and End date fields, enter the date range that you want to evaluate existing earning statement lines for. The process is based on the earning date of those lines.
3. Enter the Accounting date that you want the newly created lines to have for posting to the GL
4. Apply any other selection criteria using the Select button to narrow down which earning statement lines are evaluated.
5. Click OK

• After the process completes an infolog will appear with a summary of the process records.

Review the newly created Retroactive earning lines

The generation process created the new lines within the same earning statement as their original base line. While you could open each earning statement and individually review the lines, this would be a time consuming process depending on the volume of lines and workers processed. To simplify this we have created a new form where all retroactive earning statement lines can be reviewed across all earning statements.

1. Go to Payroll > Periodic > Earnings statement processing > Retroactive earnings > Review retroactive earning lines

This form displays all lines generated by the Retroactive earning generation process as well as any lines based on the Salary generation process (See the note about salaried positions/workers above). By default any lines that have not been released or processed show. You can also change the view to show lines that are released and not processed. Once the lines are processed they cannot be accessed from this form.

This form offers most of the same functionality you would have if accessing the lines from within the actual earning statement form. Here you can multi-select and release or place on hold. If individual edits are needed for a line, you must go to the actual earning statement, but you can easily click on the hyperlink of the earning statement column to jump to it.

Once you release the lines either from the Review form or from the Earning statement form, the lines will process like any other earning statement line.

Summary

This new Retroactive earning generation capability should greatly simplify historical increases in pay rates for your employees. No longer do you have to calculate offline and manually add the earning statement lines. We hope you enjoy this new functionality!

The Dynamics AX HCM R&D Team