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Payroll variance is important to understand and manage because it provides:
Payroll variance is calculated when the actual amount paid to a salaried employee is greater than or less than the standard cost calculated at the time of entry. Payroll variance allows you to report actual cost to your general ledger while using a standard cost rate for salaried employees on project reports.
Payroll variance affects salaried employees, as hourly employees are paid based on the hours that they work. Salaried employees receive their salary amount no matter how many hours they work. However, payroll variance can occur for hourly employees when there are rounding situations, such as in outsourced payroll. This type of variance is typically less than $1.00.
When Ajera calculates it
How Ajera calculates it
Ajera automatically calculates payroll variance for you using information from the following fields in Setup > Employees > Pay Information tab:
Ajera calculates the standard cost of a salaried employee as follows:
Salary amount per pay period/Normal or standard number of hours in a pay period
Normal hours in the period are set up in Company > Preferences > Payroll tab.
For example, if an employee is paid $1,000.00 every 2 weeks (80 hours), the standard cost rate is calculated as $1,000.00/80= $12.50.
To calculate payroll variance, Ajera determines if the cost rate for the time entered is different from the standard cost rate.
A salaried employee is paid $1,000.00 every two weeks (80 hours) with a standard rate of $12.50 per hour.
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