Valuating using the Principle of Averages
Valuating using the Principle of Averages
Purpose
This method is often used to calculate
absences, however, it can also be used to calculate holiday pay or other bonuses, for example.Prerequisites
You make the system settings for calculations using the principle of averages in Customizing for Payroll under Time Wage Type Valuation ® Averages New.
Here, you also find the section Previous Averages - Not for Reconfiguration, which refers to the calculation of averages up to Release 4.5. The old version is not further developed and is only available in Customizing to make changes. You can only use one of the two versions
; that is, you can not use the old and new tables simultaneously.In one of the up-coming releases, conversion from the old to new processing of averages will take place automatically.
You perform payroll monthly in your enterprise.
An employee takes 14 days leave in August. In accordance with the company agreement, the employee receives not only basic remuneration during this period of absence, but also extra remuneration to cover unearned bonuses. This extra remuneration is calculated on the basis of the bonuses for night work, work on Sundays and public holidays, which the employee received on average in the three previous months.
As an average calculation basis, on which the calculation of bonuses is based, you have set up the Collected Bonuses wage type in Customizing.
Process Flow
In this example, the absence is calculated using the principle of averages as follows:
1. Creating Average Bases
Therefore, the average calculation basis contains the sum of the wage types that you have selected for valuation using the principle of averages. In each payroll period, average calculation bases are formed in accordance with your settings in Customizing for each employee.
In the above examples the Bonus for Night Work, Bonus for Work on a Sunday, and Bonus for Work on a Public Holiday wage types are collected and added to the Collected Bonuses wage type. You can choose to collect the number of working hours, the amount, or the rate for the wage type.
2. Determining the Payroll Periods
For calculations using the principle of averages, only the average calculation bases for specific previous periods are used.
In the above example you have determined in Customizing that the average calculation basis should be based on the three previous months when calculating using the principle of averages. Since your employee was absent in August, that is in payroll period 8, only payroll periods 5, 6 and 7 are included in the Collected Bonuses wage type when calculating the average bonus.
3. Determining the Valuation Basis
As a calculation basis the System must determine a Rate for the Collected Bonuses wage type:
In the above example the Amount of the Collected Bonuses wage type is divided by the Number of working hours. It does not matter whether you have collected the bonuses according to Number, Amount or Rate, you must still change the calculation rule for the standard system according to the entries in Customizing.
If the average value is not recalculated for each absence valuation, you can use
frozen averages.If no average bases have been created for an employee, you can use the EE Remuneration Info. infotype (2010) to enter the
average value directly using a wage type. First, you must define a user-specific wage type for the average value and enter this in the Calculation Rules for Averages view (V_T51AV_A). For more information, see Customizing for Payroll under Time Wage Type Valuation ® Averages New.
You can define absence valuation rules for employee groupings (for example, for all salaried employees) and for groups of absence types (for example, paid leave). You define these absence valuation rules in Customizing. Please note, however, that the values used to perform a valuation in accordance with the principle of averages are determined using the average bases for each individual employee and are employee-specific.