- Adjustment pays and termination pays are to be given a lot of importance when running the year-end payroll.
- The company also has to note all the reportable fringe benefits given to employees.
- Next steps would be to create a new payroll year (also checking if definition of the holiday and factory calendar of the upcoming year are as expected)
- Define the new tax rates for the upcoming year.
- Some companies also print out all the journal reports and deduction reports.
- First run for the next payroll year also needs to be monitored as a part of the year-end activities.
- A functional consultant may have to impart user training for IT0221 (payroll adjustment).
- The company has to plan for the tax filing schedule.
SAP provides a lot of documentation related to the year-end processing processes. Refer to OSS notes 1239555 from the SAP service marketplace.
Click here for the year end preparation checklist
Click here for year-end reporting document for 2007
Click here for tax reporting paths
The purpose of the accrual process is to recognize payroll costs in the month in which they were incurred, i.e. when the employee actually performs the work.
This accrual process will result in a more accurate presentation of monthly and year-end payroll expenses and liabilities.
The accrual is calculated in HRMS and posts an entry in FI (debit department payroll expense and credit accrued liability) to account for the portion of earnings owed but not paid at month end.
The accrual is calculated as follows:
The system determines the fraction of the payrolls that were earned but not physically paid in the current month. This amount is calculated based on the number of days in each payroll that were earned in the month, as a fraction of the total number of days in each payroll (10 days for all biweekly payrolls). If an entire payroll was earned and not paid, then the fraction would be 1 (ie.100% accrual). Some months may have to accrue a fraction of one payroll, other months we may accrue more than one payroll.