If your company has decided to have your employees enroll in benefits via a third-party benefits administrator, you will need to figure out how to bring those values into Workday payroll to have them deducted on employees’ pay checks. This post is intended to provide you insight into important components to consider when figuring out how to bring benefit deductions into payroll. It will be a high-level overview of the pros and cons of loading the deductions directly into Workday payroll via payroll input or loading the deductions into Workday Benefits shadow plans that are linked to Workday payroll.
First, it helps to describe at a high level the options.
- The first option is to take all of the deduction amounts from your benefits vendor and load them via the payroll input integration directly into Workday payroll as payroll inputs. The start and end date of the payroll inputs are decided by the integration to overlap with the appropriate pay period dates so that the deductions run at the desired time during on cycle payrolls. The integration also ends existing inputs whenever there is an event that changes the amount of the deduction.
- The second option is to create shadow benefits plans in the Workday Benefits module. These plans do not have any eligibility or complex configuration and are instead simply shells where desired deduction dollar amounts are loaded. Enrollments into the benefit plans are loaded by an integration sent from the benefits vendor into Workday Benefits. The payroll deductions and imputed income earnings link to the benefit plans in Workday Benefits and pull deductions amounts from there. If desired, the plans and enrollments in Workday Benefits can be hidden from employees so that they do not see them.
- The third option is doing the first option for some deductions and the second option for others. This option tends to require two “inbound” integrations into Workday.
An Exploration of the Pros and Cons
You may be asking yourself - “why would you want to have to maintain dual benefits configuration, one in your benefits vendor’s system and one in Workday?”
Not having to do this is certainly the main “pro” of an integration directly into Workday payroll. However, loading directly into Workday payroll has several “cons,” which are described as follows:
- First, payroll inputs loaded by an integration directly into payroll cannot automatically run in on demand payments. This is most problematic with 401k deductions that must be manually added on all on demand payments, because the opportunity for human error is significant. It is particularly problematic if you intend to pay bonuses with on demand payments, because there is not a way to instruct only 401k payroll inputs (and not other deductions) to run on an on demand EIB without including the deduction and percentage itself on the EIB. The result for most clients that have tried this route is frequent inaccuracies in on demand payments and general unhappiness with it.
- Second, automated retro transactions are extremely difficult to consistently and accurately make happen with an integration. You cannot end an existing input earlier than the day after the last completed period in which the input ran. As such, while you can load a new retroactive benefit change in an earlier period and have it picked up by retro, you cannot automatically remove the existing input. A few benefit vendors provide a list of retro differences to manually load, but if not, the only option you have is a highly complex additional WD Studio component to the payroll input integration that attempts to retroactively calculate the differences that need to be removed or added. The Studio essentially tries to replicate the built in Workday Retro functionality. It is possible, but costly.
- Third, termination of payroll inputs does not always occur when an employee terminates. Rehires often have prior inputs that continue running if they are not removed.
Using Workday Benefits shadow plans solves all these problems. The main pros include:
- You have wide availability to instruct which deductions run at which time. For example, you can control which deductions run for employees on different types of leave, which deductions run for certain types of on demand payments, etc. Particularly with on demand payments, you can easily ensure that 401k deductions always run if that is desired.
- Using Workday Benefits also uses Workday’s provided retro functionality without trying to reinvent the wheel in a Studio integration.
- You can instruct on the enrollment event rule to automatically end deductions at the desired time for terminated employees, so that rehires do not have these deductions taken out upon rehire.
The main con of Workday Benefits are as follows:
- There is the additional maintenance cost in Workday Benefits, but that is relatively minimal because all the eligibility and more “complex” configuration is stripped.
- There is an additional consideration with loan deductions such as 401k Loan or Uniform Loans. It is typical for companies to monitor the remaining loan amount in Workday, which cannot easily be done in Workday Benefits. The result is that loading these directly into Workday payroll via payroll input is typically easiest. This is a “con” for the Workday Benefits route, because if these deductions come from the same vendor, you will need to have “inbound” integrations from the vendor into both Workday Benefits (for 401k at least) and into Workday payroll (for 401k Loan at least).
It is certainly possible to mix the two options. While it is quite likely that 401k deductions loaded directly into Workday payroll will cause many problems, it might be possible to load all other deductions directly into payroll without issue. This is particularly possible if you have a policy in place that makes all benefits deductions effective in the next pay period, as this eliminates the retro concern. A properly designed integration with the right benefit vendor can also properly end payroll inputs for terminated employees as well. As such, loading 401k deductions into Workday Benefits shadow plans with everything else directly into payroll can work in this type of situation.
- Always load 401k deductions into Workday Benefits benefit plans. This way, you can ensure that they run on all on demand payments while limiting the possibility of human error. It is typically worth the cost if you do any significant volume of on demand payments, because it will save you on penalty costs for missed 401k deductions.
- If you wish for Workday to monitor 401k Loan balances, you should load 401k Loan deductions directly into payroll. If you do not want Workday to monitor 401k Loan balances, AND if your 401k Loan information comes from the same vendor as the rest of your benefits, then 401k Loan deductions should be loaded however you load your other non-401k deductions.
- If you have retroactive benefits changes, you should load all non-401k and non-401k Loan deductions into Workday Benefits. If you do not have retroactive benefit changes, then either loading into Workday Benefits or Workday Payroll is adequate, and maintenance and implementation costs should be the driving factors.