Costing Methods

Which method is right for you?

There are essentially three separate levels of costing within the Payroll, these are standard or direct costing, proportional costing and mixed proportional costing. These all have different rules as explained below.

There are also global default cost centres that apply company-wide to leave.

These global defaults override all other settings. If a global default is in use the corresponding cost centre field in the Standard Pay and any open pays will not be used.

When a global default cost centre is entered in setup, it will overwrite the Standard Pay and any open pays but will not change historical data.

Standard/Direct Costing

All expenses are costed to the cost centres that have been entered against them, regardless of whether it is the employee default cost centres or not. All cost centre fields can be edited.

Example: Employee's default cost centre is 12

Pay details are as follows:

Description	Amount	Cost Centre
Wages	$600	12
Holiday Pay	$400	15

The costing report would show:

Cost Centre	Wages	Holiday Pay
12	$600
15		$400

If a holiday pay global default were set up as cost centres 13 then the costing report would show:

Cost Centre	Wages	Holiday Pay
12	$600
13		$400

Proportional Costing

There are two methods of proportional costing - Percentage and Hours:

• Percentage: Total entered must add up to 100. Proportions are expressed as percentages.
• Hours: A total hour's amount is entered and all amounts entered must add up to this figure. Proportions are expressed as a percentage of total hours. 

For either costing method the calculations are essentially the same.

All expenses are split between the proportions set up. It does not matter if the expenses are costed to the employee default cost centres or not, they will still be split. All cost centre fields in wages, allowances, and leave in all pays are disabled.

Example: Employee's default cost centres is 12

Pay details are as follows:

Description	Amount	Cost Centre
Wages	$600	12
Holiday Pay	$400	15

Proportional costing is set up as follows:

Cost Centre	Proportion
10	50%
11	50%

The costing report would show:

Cost Centre	Wages	Holiday Pay
10	$300	$200
11	$300	$200

If a holiday pay global default were set up as cost centres 13 then the costing report would show:

Cost Centre	Wages	Holiday Pay
10	$300
11	$300
13		$400

Mixed Proportional Costing

This is called mixed proportional costing because it allows you to use both direct costing and proportional costing in the same pay. Mixed proportional costing works in conjunction with proportional costing except that it does matter if the expenses are costed to the employee's default or not.

Basically everything costed to the employee default cost centres will be proportioned, everything that is directly costed (i.e. not the employee default) will be costed entirely to that cost centres. All cost centres fields can be edited; any cost centres, which is the same as the employee default cost centres, will show a flag to allow the user to treat the cost centres as a direct cost, this flag will not show if a global default is in use.

Example: Employee default Cost Centre is 12

Pay details are as follows:

Description	Amount	Cost Centre
Wages	$600	12
Holiday Pay	$400	15

Proportional costing is set up as follows:

Cost Centre	Proportion
10	50%
11	50%

Costing report would show:

Cost Centre	Wages	Holiday Pay
10	$300
11	$300
15		$400

If the holiday pay global default was again setup as cost centres 13 the report would show:

Cost Centre	Wages	Holiday Pay
10	$300
11	$300
13		$400