MSDyn365FO: From hiring to salary generation

In this blogpost, we examine the process of hiring a new employee to salary generation in Microsoft Dynamics AX for Finance and Operation. Some of the key points this blogpost is:

  • Defining and understanding titles, jobs, positions required for the hiring a new employee
  • Worker setup (like fixed compensation plan, default tax region) that is a critical aspect of the salary generation
  • Salary generation, which will differ in each company, but has become a part of almost every implementation.

Let’s dive in and hire a new employee, and to do that we will need to follow a five-step process.

hiring new worker

Business scenario:

Imagine that your company has a job – let’s say “Accounts payable controller”.  What will be the job, title, and position in this case?

Commonly, job is a list of responsibilities, competencies and tasks required to perform the job. In this case, job will be “Accounts payable controller”.

Job must have a title.  So, think of a title as a job title. In our case, title might be AP Controller, Controller, Accounts payable controller etc.

For each job, you can have one or many positions. For instance, you would like to have Accounts payable controller per each department in your company or one Accounts payable controller per region.  The more people you have for this job, the more positions you will have.

Titles

Navigate to Human resources > Setup > Titles

Click the New button. Once you open the form, you will see the list of titles available in your company.

Provide the title in the Title field.

titles

Later on, you can select any of these titles when you create a job.

Jobs

Navigate to Human resources > Jobs > Jobs

Click the New button.

Provide the Job and Job Description.

Select the Title for the created job.

jobs

Positions

Navigate to Human resources > Positions > Positions

Click the New button.

Select the Job and Department.

Later on, you can assign only one worker to the created position. If you hire additional recourse for the same position, you will need to create a new position.

positions

Pay attention to the title. Title will be inherited from the Job assigned to the position.

position title

Expand Payroll tab.

Select Pay cycle – weekly.

pay cycle

Select Paid by and Annual hours. Make sure that Generate salary flag is marked.

generate salary flag

Select Default earning code with Hourly rate basis.

Earning code will define the type of earning that worker receives. For our particular case, we will calculate regular salary.

default earning code

Select the Schedule – Normal working schedule (working days and hours).

schedule

Worker

Navigate to Human recourses > Workers > Employees

Click the New button.

Provide First name and Last name.

Select Employment start date.

Select created position in the Position field.

Specify the Assignment start date. Keep in mind that the assignment start date must be later than or equal to the activation date of the Position.

hire new worker

Click the Hire button.

Fixed compensation plan

Navigate to Human recourses > Compensation > Fixed compensation > Fixed compensation plan

Click the New button.

Provide Plan name, Description, Type, Currency, Pay rate conversions.

In our case, we will be using 52 working weeks for our employees. These pay rate conversions will be used to calculate the different pay rates shown on an employee’s fixed compensation plan.

pay rate conversions

fixed compensation plan

Save the plan and click Set up compensation button.

Fill in Reference setup field.

set up compensation

Click OK button.

Click Compensation structure button (Initially it was called Compensation grid).

Create the structure of your rates.

compensation structure

Open worker details form and switch to the Compensation tab.

compensation tab

Click Fixed plan link.

Click the New button.

Select Hire action and select created position.

In the Plan field, select the created plan. Basic plan that we created is invisible since Eligibility rules were not set up.

plan field

Let’s navigate to the Human resources > Compensation > Eligibility > Eligibility rules.

Eligibility rules need to be assigned to each plan. Eligibility rules determine the eligible employees based on the jobs, job functions, job types, departments, labor unions or compensation regions/locations.

Create new rule by clicking New button.

Specify the Plan, and Job.

eligibility rules

Now, if you go back to the employee compensation plan, you will be able to select the created plan.

plan selection

After plan selection, choose the Step.

step field

The reason why Step is not displayed here, it’s because the Step was not assigned to the Job of the employee.

Let’s switch to the Job form and populate the Level.

job level

Go back, and now it should be possible to select the rate.

step selection

Pay rate will be automatically displayed after Reference point selection.

create compensation form

Review Employee fixed compensation.

employee fixed compensation

Click OK button and close the form.

Worker tax region and Default tax region

On the Employees from, click Payroll tab on the Action pane.

worker tax region and default tax region

Select Worker tax region button.

Click the New button and select Tax region from the drop-down list.

worker tax region

Close the form.

Select Default tax region button.

Make sure that Default tax region is selected.

default tax region

Close the form.

Salary generation

We will go through the following process to generate the salary:

salary generation

Earning statements

Earning statement will provide information about how many hours employee worked.

There are 2 options how you can create Earning statement.

Manual Earning statement creation

Navigate to Payroll > Earning statements > All earning statements

Click the New button.

Populate the following fields:

  • Worker
  • Pay cycle
  • Pay period
  • Earning date
  • Earning code

manual earning statement creation

Rate was automatically calculated.

Now let’s stop for a second and I will describe how this rate was calculated.

The calculation below based on the Hourly rate basis of the Earning code. The logic of the calculation is the following:

  • The system calculates Annual pay rate:

In order to calculate Annual pay rate, first, need to define Pay rate from fixed compensation plan assigned to the worker. In our case it’s 18$

  • Next, Annual conversion factor needs to be defined based on the Pay rate conversion identified in the fixed compensation plan. In our case it’s 52$

annual conversion factor

  • Next, pay rate multiplied by annual conversion factor

Annual pay rate = Pay Rate * Annual Conversion Factor. In our case, Annual pay rate = 18 * 52 = 936

  • The system calculates Hourly Rate:

The system determines the annual normal hours from the position assigned to the worker. In our case, it’s 2080

annual normal hours

Next, the system divides Annual pay rate by Annual normal hours. In our case, it’s 936/2080 = 0.45

To sum up, Rate = (Pay Rate * Annual Conversion Factor) / Payroll Normal Hours

Rate = (18 * 52)/2080 = 0.45

 

Automatic Earning statement creation

Navigate to Payroll > Workers > Employees

Click Payroll tab on the Action pane.

Click Earning statement button.

earning statement button

Select Pay cycle, Pay period and click OK.

generate earnings statements

You will see the message that earning statement was created.

created earning statement

Navigate to All earning statements, find the created one.

all earning statements

Quantity was automatically calculated.

Now let’s stop for a second and I will describe how this quantity was calculated.

The logic of the calculation is the following:

  1. The system identifies annual payroll normal hours from the position. In our case it’s 2080
  2. The system calculated annual number of days. In our case it’s 365 days
  3. The system divided payroll normal hours by annual number of days. In our case it’s 2080 / 365 = 5.698630136986301. It means that every day, worker should work 5.698630136986301 hours. Assume that this is work hours per day;
  4. Since we have weekly pay period and we selected the following pay period 1/8/2019-1/14/2019, let’s calculate how many days from this he actually worked. We hired our worker 1/11/2019. Form 1/11/2019 till 1/14/2019 it’s only 4 days.
  5. Multiply work hours per day by worked number of days within the week. In our case, it’s 698630136986301*4=22.79452054794521

To sum up, Quantity = (Annual Payroll Normal Hours/ Annual number of days)* Worked Number of Days)

Quantity = (2080/365)*4 = 22.7945 hours.

 

Release earning statement

Navigate to Payroll > Earning statements > All earning statements

Click Release earning statement button.

release earning statement

Keep in mind that in order to proceed with releasing of the earning statement, accounting setup must be completed. In our case, Salaries and Wages expense account has been selected.

salaries and wages expense account

Payment status will be changed to Released.

released payment status

Click Pay statement button on the Action pane after refreshing the form.

On the Generate pay statement form, chose the payment date and click OK.

generate pay statement

Message that pay statement was generated would appear.

message that pay statement was generated

Navigate to Payroll > Pay statements > All pay statements

Open the Detail form of the created pay statement.

all pay statements

Submit for payment

Click Submit for payment button on the Action pane

submit for payment

Click Submit button.

Message that payment journal was created would appear.

message that payment journal was created

Payment journal

Navigate to Payroll > Pay statement processing > Payment journal

Find recently created journal and click Lines button.

You will notice that Amount = Salary amount – Deducted taxes.

payment journal

Click Functions -> Generate payments button.

functions generate payments

Click OK.

Validate check number.

payroll check payment form

Click Document link and instead of Printer, select the Screen.

print destination setup

Review the check.

salary check

Status has been set to Sent.

Go ahead and Post the journal by clicking the Post button.

Message that journal was posted would appear.

posted payment journal

That’s it for now!

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