Style 1 Cost Dilution

Style 1 cost dilution is one method of Labor Cost Dilution available in the Unanet system. The main purpose of this style of dilution is to calculate an effective cost rate for each exempt person. Since an exempt (salaried) employee normally gets a fixed salary regardless of how many hours he or she works, their rate must be adjusted based on the number of hours they actually worked versus the number of hours in a period. This adjustment yields the true, or effective, cost rate per hour.

Calculation

The effective cost factor will be calculated on a per person, per time period basis. This calculation will be triggered each time a timesheet’s status changes to ‘COMPLETED’ or any time an Adjustment data extract occurs. Once calculated, the effective cost rate will be stored in the database along with the timesheet detail information so that any further reporting or extracting can use the value without having to recalculate it. The Calculation for Style 1 Cost Rate Dilution is as follows:

Calculate standard number of pay period hours (std pay period hrs). Each time a user creates or saves a timesheet, one or more Person Dilution entries are created. Among other things, they contain the available hours for each dilution period (which they got from the Time Period screen). If you want, you may use the Person Dilution screen to override this value on a person by person basis, but normally, you will never have to access that screen.

Get hourly cost rate (hourly cost rate). This is read directly from the Person Rate information that is in effect for this dilution period.

Accumulate regular hours reported (reg hours reported). Regular hours consist of all hours reported to pay codes with their dilution indicator set to "Yes". Pay codes are maintained by the administrator on the Types-Pay Code screen.

Calculate effective cost factor (eff cost factor). This is simply the std pay period hrs / reg hours reported.

Once the eff cost factor is calculated, the last step is to use it to modify the eff_cost_rate in the database. (time sheet cells). Again, this calculation is done only for exempt employees. The formula is as follows: eff cost rate = hourly cost rate * eff cost factor.

Reporting

To help view the diluted cost, Labor Cost Reports were added to the system to allow for additional data analysis, including:

§         Reports – People – Cost

§         Reports – Project – Cost

A number of existing Reports are enhanced to display cost information as either diluted or undiluted – this list of reports includes:

§         Reports – People – Time Detail

§         Reports – People – Summary

§         Reports – People – Cost

§         Reports – Project – Time Detail

§         Reports – Project – Summary

§         Reports – Project – Cost

§         Reports – Financial – Margin

Person Dilution Screen

A new Dilution screen hangs off the Admin People Edit screen to allow for the viewing of person dilution information (recalculate status, factors, etc.). This screen also offers the administrator the manual ability to recalculate a person’s dilution information on demand. This is useful if you want to adjust an individual person's available hours in a particular period.

Other Considerations

The Project Cost Rate overrides has also been disabled when Style 1 Cost Dilution is enabled. Cost rates must remain constant for each person for a given dilution period or the calculation will not be accurate. If you have an exempt employee whose salary changes in the middle of a dilution period, see handling pay changes off dilution boundaries for an example of one method used to handle this situation.
The Cost Rate field has been removed from the Adjustment screen in the event Style 1 Cost Dilutions is enabled. Cost rates must remain constant for each person for a given dilution period or the calculation will not be accurate. This functionality can now be achieved with the RetroActive Rate change screen.
The Dilution Period field on the Person Rate screen and the Person Add screen will appear only if Cost Dilution is enabled.
The Adjustment process was enhanced to generate all necessary adjustment records in the event Cost Rate Dilution is enabled. This means that even if you only added 1 hour to a person's timesheet, every single entry will have to be adjusted. The reason for this is because any change that effects the dilution calculation will have an effect on each and every time entry (effective cost rate).

Setting Your System up for Style 1 Dilution

Before you use Style 1 Dilution, there are several items which must first be addressed. It is important that you handle all of these items before allowing users access the system with Style 1 Cost Dilution enabled. If you have just started setting up your Unanet system and are going to use Style 1 Cost Dilution, you should follow the guidelines below as you set you data up in the system. If you are already using Unanet, then you should pick a time when no user activity will occur and follow the steps below.

Ref #	Item	Description
1	Properties file update	In order for the system to use Style1 Cost Dilution, you need to enable it in the unanet.properties file. There are two values that need to be added to this file. First, you need to add unatime.select.cost.dilution=true -- this lets you choose whether or not to user cost dilution on various reports. Second, add unatime.cost.dilution.class=com.unanet.unatime.data.Style1CostDilution -- this tells the calculations to take place. Once the unanet.properties file has been updated, stop and restart your servlet engine and the changes should be in effect.
2	Dilution Periods	You must make sure that all Exempt people in the Unanet system have dilution periods defined. The dilution period tells the system what period of time the system uses to calculate cost dilution for each person. For existing employees, dilution periods are defined on the Person Rate screen. If necessary, add a new rate for each person who does not already have a dilution period. For new people, you can enter this information on the People screen when you create them.
3	Cost Rates	Since Style 1 Dilution is designed to work with true salary cost values, you need to calculate the correct cost rate for each exempt employee. This cost rate should represent only the person's salary per hour, based on their annual salary -- not any additional overhead such as benefits, expense allotments, bonuses, etc. For existing employees, cost rate is defined on the Person Rate screen. If necessary, add a new rate for each person who does not already have the correct cost rate. For new people, you can enter this information on the People screen when you create them.
4	Hours In Period	You need to make sure that each Time Period defined in the Unanet system has the correct hours in period value. This is what the system uses when performing the Style 1 Cost Dilution calculation (worked hours/available hours). If your Unanet system was upgraded from a prior version, these values were defaulted based on the the period type (monthly - 173.3, twice a month - 86.6, every two weeks - 80 or weekly - 40). If these values are not correct for your location, you should update them now.
5	Pay Code - Dilution Indicator	Each pay code defined in your system now has a Dilution Indicator associated with it. The default value for this indicator is "Yes", which means that any time charged to this pay code will be factored in to the cost dilution calculation. If you have specific pay codes that you do not want to be included in dilution, change their dilution indicator to "No".
6	Timing	One of the most important things to consider when activating Style 1 cost dilution is "when?" Since dilution changes cost rates for all exempt employees, the best time to activate it is after all timesheets for a time period have been COMPLETED, SUBMITTED, APPROVED, and, if you extract data from Unanet, EXTRACTED. Next, make sure that steps 1-5 on this checklist are complete.

Handling Pay Changes Off Dilution Boundaries

As stated above, cost rates must remain constant for each exempt person for a given dilution period or the calculation will not be accurate. So what happens if someone's salary changes in the middle of a dilution period? Let's take this situation as an example: Jane, an exempt employee who works for you, is supposed to have a pay raise on November 8. Her dilution period is monthly beginning on the first of each month. You can handle this in the Unanet system by using the following steps:

Add a new rate for Jane beginning on November 1 -- change her classification to 'NON-EXEMPT' and make sure her cost rate for this new rate is correct. You may have to manually adjust this rate if any dilution is necessary for the first 8 days of November.
Add another new rate beginning on November 8 -- still keeping her classification as 'NON-EXEMPT', but now increase her cost rate to match her new salary. Again, you may have to manually dilute this rate depending on the hours Jane works from November 8 to November 30.
Finally, add another rate beginning on December 1 -- you will be able to change her classification back to 'EXEMPT' since this is date is on a dilution boundary. Make the cost rate her real cost rate for her new salary. From this point on, dilution will be calculated automatically by the system.

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