8/13/2019 12727285851272595541full_claims

1/3

The Life Cycle of Employee Overpayments Claims Processing

Below is a snippet from one of hundreds of articles available to ERPtips subscribers.If you would like a complimentary copy of the full article, please email

Mark.Downs@ERPtips.com(include the title of the article in your email)

To subscribe to ERPtips, go to

www.ERPtips.com/Subscribe.asp.

ERPtips Journal is published by Klee Associates, Inc.ERPtips University provides both public and onsite training for SAP clients.

For more about ERPtips University, including the current schedule, click here:www.ERPtips.com/WorkshopSchedule.asp

The Life Cycle of Employee Overpayments Claims Processing

Integration points between FI & HR can manage complex business processes entirely within R/3,for example, handling overpayments, a.k.a. claims processing. In the past, many SAP users sim

Click here to read this Snippet

http://www.erptips.com/Snippets/ihqvujzxrp.pdf#page=2http://www.erptips.com/Snippets/ihqvujzxrp.pdf#page=2

8/13/2019 12727285851272595541full_claims

2/3

SAPtips 2004 Klee Associates, Inc.

Page1

April/May2004VolumeIIIssue2

www.S

APt

ips.com

SAPtips

SAPtips

Journal

Journal

Editor's Note: Our new HREditor Satish Badgi has seenthe power of SAP integrationfirsthand. He knows that theSAP modules come into theirown when they are linked close-ly to each other. The integra-tions points between FI and HR,for example, allow for complexbusiness processes to be man-aged entirely within R/3. One

such example is handling over-payments, a.k.a. claims pro-cessing. In the past, many SAPusers simply wrote off suchclaims because it seemed toocomplicated to handle withinthe system. But in fact, SAP canbe configured to handle over-payment scenarios. Of course,you have to do some upfrontwork by clarifying the exactprocess your firm will use for

different scenarios. In this two-phase article, Satish walksreaders through the key busi-ness issues SAP users facearound claims processing, andthen he outlines a recommendedconfiguration for a real-lifeclaims scenario. Using step-by-step illustrations, Satish showshow to make HR and FI worktogether to resolve a commonbusiness situation.

BackgroundIn a real-life environment, there

are always situations whereby theemployees owe money to theemployer. In some cases, theseclaims are automaticallyprocessed by payroll schema inthe next pay-period while in oth-ers, the users need to clear theseclaims and handle a multi-step

complex process as explainedhere. This could be due to manyreasons:

Overpayment by employer toemployee.

Wrong dates for termina-tions/leaving.

Late notice of Leave WithoutPay.

Retroactive calculations sys-tem deciding to take backmoney.

Retroactive changes to pre-taxdeductions.

The challenge in the process isincreased if:

The employee is in theprocess of leaving the organi-zation.

The employee would like tohave a repayment plan if theamount in question is large.

The employee has a varietyof pre-tax and post-taxdeductions.

This problem crosses the

boundaries of HR and Finance.The processes in HR create situa-tions for Financecreatingreceivables, reducing the expens-es, and managing vendor pay-ments for taxes and benefits. Inaddition, the HR team may havetheir own challenges to their sani-ty while keeping track of Year-To-Date (YTD) tax figures so that theW-2 and Form-941 represent cor-rect figures.

Based on the experience of thauthor, SAP users can benefrom some extra help in areas Finance and Tax integratioMany SAP users tend to take easy way out of these issues simply writing claims off on taccounting side. But through tcourse of this article, we'll see thrather than writing off claims anlosing money, it is not difficult handle overpayments and recovmoney if SAP is configured corectly. This article covers tissues associated with claims prcessing and the required configration in HR/FI. I'll point outnumber of useful and practictips along the way.

A Note on Terminology MaHR departments refer to Claim

as Flexible Spending AccouClaims, while SAP refers Claims Processing as in Ove

payments. This article will use tterminology claims for ove

payments in line with SAP termnology. Readers will also note ththis article pertains to SAP userunning version 4.6C and highWhile many of these tips apply earlier versions of SAP as wethis article is based on the 4.6environment,

What Causes ClaimsIt is essential for readers

know and understand tRetroactive Accounting processSAP, since retroactivity is almoa pre-requisite to the claims prcessing problem.

Claims are always generatdue to retroactive calculations payroll. The most common situ

The Life Cycle of Employee Overpayments/Claims Processing:From HR Master Data to Finance Posting

By Satish Badgi, Unisys Corporati

8/13/2019 12727285851272595541full_claims

3/3

SAPtips 2004 Klee Associates, Inc.

Page2

tions that cause this retroactivityare explained below:

Retroactive tax rate change A state or township couldchange its tax rates, not givingyou enough time to apply theTax Update Bulletins (TUBS).For example, you should haveapplied the TUB for payrollperiod 10; instead you appliedit in period 11 or 12.

Retroactive time changeswith/without time evaluationAn employee got paid forovertime or vacation in period10, and then you decide torevert that in period 11 or 12.

Retroactive middle-of-pay-period employee termina-tions/resignations Payrollwas processed forchecks/direct deposits, andHR receives late intimationfor termination action. Nowyou need to recover the money

from the employee. Note: thesame situation will be appli-cable if the employee is pro-ceeding on long-leave-with-out-pay and HR receives latenotice after the employeecashes checks.

Retroactive pre-tax benefitchanges An erroneous pre-tax benefit is changed topost-tax.

Wrongful changes to wage-type configuration withoutusing proper de-limiting func-tion for the Infotype Post-tax deduction are changed topre-tax deduction by chang-ing the processing class.

Forced retroactive payroll runUsing the forced retro date inthe payroll driver.

One or more of these reasonswill give rise to retroactive calcu-lations and hence will generateclaims in your current pay period.The following arithmetic will tellyou how the claims are generatedwith reference to wage types. Inpayroll schema terms:

If wage type /560 is less thanzero at any time, wage type/561 gets generated. Since/560 is the amount to be paidto an employee, and if it hap-

pens to be negative, the sys-tem interprets that asemployee owes money to thesystem and a claim is auto-matically generated by SAP.

Subtract the total overpay-ments from the net payamounts (wage type /559,/560) in the current pay peri-od. If the resulting amount isnegative, then that will beequal to the claim amount that

is generated (wage type /561).

What Is the Quick Way toFind Claims?

The most thorough way to findclaims is to use the claims schemaand report RPCLMSU0. Butbefore we learn about thoseadvanced methods, keep in mindthat you can always use the tradi-tional wage type reporter to iden-

tify claims by using wage ty/561. Wage type /561 in payrresults is a claims wage type. SA

provides you with the repoRPCLMSU0 to give you the exapicture on pre-tax and post-tdeductions along with claiamounts. After learning the funtionality of this report, you wunderstand why traditional watype reporting is not enough fclaims processing.

Issues Associated withClaims Processing

SAP has provided repoRPCLMSU0, its claims report, give you the complete picture claims. This report uses schemUCLM and works only in tesmode, (i.e., this schema will nwrite any payroll results). Onyou have identified the claimyou need to understand the issuassociated with claims and gettirid of claims. The RPCLMSUreport will tell you the differecomponents of the claim: ear

ings, pre-tax deductions, apost-tax deductions. Before ycan proceed with claims procesing, your organization will needhave developed processes anstrategies for managing claims.has been my experience that, moof the time, this is overlooked duing business blueprinting aimplementation. Let us look some major questions involved claims processing:

What is the best way to recovmoney from an employee? Mopublic sector organizations havepolicy that even if the claim small (in cents), they cannot wrthis claim off, and the amount hto be recovered from the emploee (or ex-employee). In the casethe commercial sector organiztions, if the cost of recovery of tclaim is more than the claim, t

April/May2004VolumeIIIssue2

www.S

APt

ips.com

SAPtips

SAPtips

Journal

Journal

SAP has provided

report RPCLMSU0, its

claims report, to give

you the complete

picture of claims.