How Do We 'Back-Charge' Payroll Costs?
Q: How do we "back-charge" payroll costs for a roving internal work team? We are creating a "utility team" that would be trained in several departments. We aren't sure how we should bill departments for borrowing staff from other departments. Is this typically done on an hourly, weekly or some other basis?
- Payback Is Hell, customer care manager, insurance, Windsor, Ontario
A: You've described a fairly common situation faced by many organizations. For example, a restaurant that has opened a new location across town may pull several employees from its existing location to spend several hours a week to help train employees and open the new place. And employees at an advertising agency typically work on projects for multiple clients, each of which is charged for the hours worked. Other organizations- like yours-may simply have work teams composed of employees pulled from a variety of other areas to support a special project or training needs. In each case, employees' pay and benefits need to be properly accounted for to ensure the costs are being charged to the appropriate department, location or job.
Typically, a business with employees floating between departments- whether in a training capacity or on an ongoing basis-will calculate the hours worked in each assigned area per pay period. The total hours worked translates to a percentage of their total pay. This percentage is applied to the other associated costs (such as benefits, taxes, etc.), which are also charged back to the departments appropriately.
Your payroll provider may have software that can support the situation you describe. Such applications often have corresponding labor discrimination reports that report all the related costs or expenses for those distributed hours by department. These figures can then be reported according to your organization' s process so the appropriate departments are absorbing the charged or "distributed" costs.
[Source: Leonard Redon, vice president of Western operations, Paychex Inc., Rochester, New York, June 11, 2008.]
Q: How do we "back-charge" payroll costs for a roving internal work team? We are creating a "utility team" that would be trained in several departments. We aren't sure how we should bill departments for borrowing staff from other departments. Is this typically done on an hourly, weekly or some other basis?
- Payback Is Hell, customer care manager, insurance, Windsor, Ontario
A: You've described a fairly common situation faced by many organizations. For example, a restaurant that has opened a new location across town may pull several employees from its existing location to spend several hours a week to help train employees and open the new place. And employees at an advertising agency typically work on projects for multiple clients, each of which is charged for the hours worked. Other organizations- like yours-may simply have work teams composed of employees pulled from a variety of other areas to support a special project or training needs. In each case, employees' pay and benefits need to be properly accounted for to ensure the costs are being charged to the appropriate department, location or job.
Typically, a business with employees floating between departments- whether in a training capacity or on an ongoing basis-will calculate the hours worked in each assigned area per pay period. The total hours worked translates to a percentage of their total pay. This percentage is applied to the other associated costs (such as benefits, taxes, etc.), which are also charged back to the departments appropriately.
Your payroll provider may have software that can support the situation you describe. Such applications often have corresponding labor discrimination reports that report all the related costs or expenses for those distributed hours by department. These figures can then be reported according to your organization' s process so the appropriate departments are absorbing the charged or "distributed" costs.
[Source: Leonard Redon, vice president of Western operations, Paychex Inc., Rochester, New York, June 11, 2008.]