The In’s and Out’s of Payroll Encumbrances
There has been some confusion with regard to the differing amounts of payroll
encumbrance released from month to month. Each pay period, the payroll office runs the encumbrance process to
calculate the new encumbrance from the first day of the next pay period through the end of the fiscal year unless a
termination row exists on the job data panel. The encumbrance process calculates the standard hours per week
times the hourly rate on the compensation panel times the number of days remaining in the fiscal year or through
the termination date. This calculation will include the longevity if it is paid locally. When the release process runs, it
takes the newly encumbered amount, compares it to the last encumbered amount and releases the difference.
Why were encumbrance releases different in January than in previous months? Assume that at the beginning of the
fiscal year, an employee was paid at one rate. On January 1, the employee received their merit and across the
board raises and also had a longevity pay increase. When the new calculation occurred, it calculated the new en-
cumbrance which was significantly higher than the last encumbered amount. It released the difference between the
new encumbrance and the old encumbrance, which caused the release to be less.
Peoplesoft calculates encumbrance based on a daily rate for the employee for the remaining fiscal year.
Encumbrance release is calculated following every pay period for the employee paygroups included in that payroll
The following are the formulas for calculating encumbrance for Bi-weekly and Monthly employees:
Salary X 12 /365 = Daily rate X # of days left in the fiscal year
Standard hours X Hourly rate X 52 Weeks / 365 Days X the number of days left for the fiscal year.
If there is a termination row to the position for an employee, the encumbrance will stop at that point.
If there is a new funding row on the department budget