Topic: Wage Payments and Chargeouts
A common requirement in the Housing and Construction Industry is to not only pay and record wages for employees as an Operating Expense, but also to distribute or charge the cost of employees to jobs and projects. The following is a suggested way of handling the employee payments and cost reallocation in DATABUILD for Windows.
Employee Pays:
All Employees (wage earners) are recorded in the system as Suppliers (Contacts).
Pay Deductions and Oncosts
The following is an example of the set-up details required for various forms of deductions and oncosts. Note that "Pay As You Go" and "Withholding Tax " have been introduced, and "Pay As You Earn" and "Prescribed Payment System" taxes have been dropped as of 1/7/2000.
A Pay Deduction (3 character code) can be created for the PAYG Tax, e.g. PYG. Generally the “Percent” and “Fixed” amount fields are left as zeroes. However, you may wish to create tax coefficients for the PAYG deduction based on the break points on the ATO’s Tax Schedule (refer below for examples). The system at the time of payment automatically calculates the tax payable. These facilities are not meant to be a substitute for a full payroll system and the tax calculation. A deduction would be necessary for each scale that is required, e.g. Weekly Scale 1 Column 4 (WP1 deduction code). If the “Percent” and “Fixed” fields are left as zero then the desired tax amount can be entered at the time of payment. Select and Save the applicable Deduction code/s and Oncosts against each employee when you are in Supplier maintenance - “Load Supplier” module. Each Deduction must have a valid GL account; Supplier; Job; and Cost Centre assigned to it.
Tax coefficient examples if set in the Formula field of the PAYG deductions:
WP1: PAYG Week Scale 1 Column 4 tax coefficients 94:17,671:199,863:283,1305:497,2000:834,
WP7: PAYG Week Scale 7 Column 3 tax coefficients 112:0,265:26,287:34,384:52,961:234,1153:318,
1305:391,2000:728,
The following (refer sample screen below) is an example of the new deductions and oncost with their associated codes and GL accounts. It is recommended that existing used deductions should not be altered or deleted so that prior accounting and reporting integrity is preserved. Each deduction requires a GL account; Supplier code; Job; and Cost Centre.
Suppliers – Pay Deductions screen:
Note that the saved deduction or oncost relating to a particular Supplier will appear in the lower right field “Pay Deductions” of the “Suppliers” main screen. The applicable deduction/s must appear here to be active and will be displayed in the Payment screen for the Supplier.
If Voluntary PAYG Withholding Tax deductions are to be applied to Suppliers with an ABN and with GST applicable, then the PAYG deduction (PYG) could be used as distinct from the new Withholding Tax deduction (WHT). However, it would be preferable to create a new deduction (VDN) with the same codes as the PYG deduction, i.e. use the same GL account, Supplier and Job, and a new Cost Centre of VDN. The gross is reported at W1 and the tax at W2 on the BAS. The WHT deduction of 48.5% is applicable to non ABN Suppliers where the gross is reported at G14 and the tax at W4 on the BAS.
(refer How Do I : Payment Deductions – Voluntary on how to set up this form of deduction).
Processing Employee Wages:
Post the wages for employees by processing an INVOICE transaction for the GROSS amount and PAY the outstanding invoice for the employee. Deductions will be made automatically if a fixed deduction amount; percentage; or formula exists on file, otherwise you can edit or enter the deduction amount while you are in the PAYMENT screen. Deduction amounts that permit editing are displayed in blue. A credit invoice is automatically applied against the employee giving a net pay result, and an invoice is automatically generated payable to the nominated deduction Supplier, e.g. Australian Tax Office for PAYG Tax.
Note that in the Payment screen, deductions will appear in black with either a black calculated amount or a blue amount which indicates that it can be edited. Oncosts will be displayed in red, and generate an invoice payable to a third party and do not deduct from the gross amount payable to the selected Supplier.
It is recommended that gross wages are posted against a Wages Expense account created in GL Expenses with an associated Overhead or General Ledger Cost Centre. This approach will assist in the reconciliation of Group Certificates.
Employee Wage Chargeout:
There is often a requirement to allocate the cost of labour to Jobs so that a realistic construction cost can be obtained. The recommended approach is to use Journals or Timesheet posting (which also generates a journal) and not to directly post gross wages via invoice postings. The following sections discuss these approaches.
Firstly a General Ledger account is required to record the chargeout offset, e.g. 5.5 Labour Chargeout (will offset the Labour chargeouts to Jobs from a Gross Profit point of view), or 4.5 Wage Expense Recovery (as distinct from the Wages Gross expense account), or 7.5 Wage Chargeout (if labour and supervision is a source of income). Seek advice from your Accountant on the appropriate choice. Of course a Cost Centre is required in the Overhead or General Ledger Cost Centre Bank for Labour or Wage Chargeout.
Posting the Cost to Jobs:
Posting the costs to Jobs is performed by journal entries. A Time-sheet/Worksheet would show the hours worked by an employee on the various Jobs and Cost Centres. An hourly chargeout rate needs to be calculated for each employee or category of employee. This may be simply based on the normal gross rate or include an oncost component, or maybe an industry rate.
If Oncosts are to be added to Gross Wages and charged to Jobs, such as Annual; Sick; and Long Service Leaves; WorkCover; etc. then the hourly chargeout rates should reflect these Provisions and there would be Credit journal postings to Balance Sheet accounts in addition to the Wages Chargeout amount.
Sample Timesheet/Worksheet (partial only):
Worksheet for: John Daniels Week Ending: 13/01/99
Job Cost Centre Hours Chargeout Rate Total
98001 14K 20 35.00 700.00
98002 14K 20 35.00 700.00
$1400.00
Select “Posting” – “Journals”. Enter the Job code then Accounting Date, then Cost Centre code, which is automatically followed by the linked General Ledger account. Enter the Journal reference, then the amount for the Job and Cost Centre then the Comments and click on the update button below the amount or press the ENTER key. Positive amounts are used for Journal posting with the nature of the account being sensed by the system to offer a default Debit or Credit condition.
An example of a JOURNAL Posting based on the example Time-sheet:
When all Job cost postings have been made for the current employee then a total Credit entry would be made to the Labour or Wage Chargeout account. The Job will be of a General Ledger or Overhead type with a Cost Centre and General Ledger account of an Expense; Cost of Sales; or Income nature, depending on your approach. Once this entry has been made and updated to the right of the Journal input screen, and providing the Journal balances overall, it can then be updated by clicking the UPDATE button at the top of the screen (generally print the Journal Batch before updating).
Timesheet Input using Databuild Timesheet posting:
The Wages “Timesheet” posting facility performs the same function as the Journal previously described, but it cannot handle the crediting of oncosts. However, the benefit of using the Timesheet facility is that you are able to obtain Employee/Job reporting based on the hours charged, and in addition the hours will appear in the Reference on Job transactions.
Create NEW Employees by entering their Supplier Code, then create a NEW Pay Classification for the employee or use an appropriate existing one.
Then create and select the appropriate Wages Recovery or Chargeout for each employee.
Once the set-up work is completed, select the Employee; Pay Classification; and Wages Recovery account that applies, then nominate the day in the “From” and “Until” fields, also the default Job and Cost Centre. Re-order the columns in the lower right timesheet posting section to suit your requirements. “Date” – “Job” – “Cost Centre” – “Hours” is probably the most convenient. Either alter the “Until” date or edit the new timesheet line date accordingly after you click on “Add New Timesheet”. Then enter the Job, Cost Centre and hours as per the worksheet. Use the Cursor and Enter keys to make each entry, and use the cursor “up” then “down” after each entry to record it then back to “Add a New Timesheet” line.
Update the current entries by clicking on the red arrow “Update Timesheet Transactions” button. Journal postings will be generated (refer to sample Audit Trail following this screen).
A sample of the resulting Audit Trail of postings:
AUDIT TRAIL
28 JNL 13.01.199 TS6:8 Daniels, John 98001 14K 5.1100 $280.00
29 JNL 13.01.199 TS8:8 Daniels, John 98001 14K 5.1100 $280.00
30 JNL 13.01.199 TS9:4 Daniels, John 98001 14K 5.1100 $140.00
31 JNL 13.01.199 TS10:4 Daniels, John 98002 14K 5.1100 $140.00
32 JNL 13.01.199 TS11:8 Daniels, John 98002 14K 5.1100 $280.00
33 JNL 13.01.199 TS12:8 Daniels, John 98002 14K 5.1100 $280.00
34 JNL 13.01.199 WRCJD GENLED LABCO 5.5000 $1,400.00
Total Credits $1,400.00 Total Debits $1,400.00
If oncosts have been included in the chargeout rate then a Journal would be required to debit the account e.g. 5.5 and credit the various oncost provision accounts, e.g. Annual Leave, etc.
End of Document