ADP Seems Incorrect

Details
Last Updated: Wednesday, 26 February 2025 14:32

ADP Rate Calculations

There are only two components to the calculation to check.

  1. The earnings over the past 52 weeks.
  2. The days actually worked in that period.

The first is easy to check. The approx earnings can be confirmed by scaling the total gross earnings for the year to date. Just divide it by number of months passed from April and multiply by twelve. A more accurate figure can be obtained from KeyPay Archives.

Days worked are not so easy. Any days actually paid or worked all count, but the time worked on any particular day is not relevant. Every day, or just part of one, counts as a whole day and includes all Annual, Sick, Public Holidays etc. So if an employee mostly works two or three days a week, multiplying 2.5 by 52 (assuming employed for the whole year) should be a good approximation. Divide this into the earnings and compare it against the payroll ADP. A variation greater than 15% is likely suspicious and a more accurate count of the days worked is needed. If this still results in more than a few percent difference it is likely the payroll is not capturing the correct data and its configuration should be carefully checked.

In KeyPay, simply running the Annual Leave average rate calculation report should immediately clarify the situation. It shows both the Average Leave and ADP calculations, plus the earnings for every payday for up to 52 weeks. Because the same earnings values are used for the Annual Leave average, if that rate is not in doubt then the days worked must be incorrect. Check the RDP page on the employee master file and ensure it's configuration is correct.

RDP settings must be reviewed whenever an employee changes his work conditions. To avoid having to enter the days employed per pay for every employee during entry, default values provided are used instead. e.g An employee may be shown as a 5 day week worker when in fact he now works 3. Only by setting this default to zero and turning on Use ADP will the number of paid days question be asked. If the default was 1 and he actually works two or three per week the calculation could be double or triple the true rate.

Remember ADP is being used because the time worked on any given day is unknown. Default values are needed to ensure historic calculations remain correct if an employee later changes from one category to the other that may need to use it. e.g. This could be a one time salaried employee who has since retired and now consults on one or two days per week as needed.

When a work pattern changes, such the above example which now requires using the ADP, it immediately calculates using the previous 52 weeks earnings. e.g If no default days had been recorded while salaried, after one week following the transition and the employee worked, say for two days in the first week, his daily rate now calculates to one years salary divided by two!

So it is extremely important that correct default values apply at all times, regardless if the employee currently needs ADP or not.

In some situations it is possible to configure KeyPay so that no days are recorded. Casual employees are the most likely to be affected. Its only likely to become a problem when moving away from full time - it's more common for casuals to become full timers with fixed hours than the reverse.