# Fringes in PAI #fringes #financial-management Fringes in PAI are percentage-based markups that can be applied to line items, departments, or categories within your estimates. They provide a flexible way to account for additional costs beyond base rates. ## What Are Fringes? Fringes are percentage-based markups applied to line items to account for additional costs such as: - Insurance - Payroll taxes - Agency fees - Production fees - Contingencies - Other percentage-based charges These markups can be applied at various levels in your estimate and can have different external (client-facing) and internal (cost) values. ### Common Fringe Types Organizations typically use fringes for the following purposes: - **Production Fees**: Company's service fee/markup on production expenses - **Agency Fees**: Fees paid to or charged by coordinating agencies - **Sales Tax**: Required tax collection on applicable items - **VAT:** Value Added Tax, or general consumption tax - **Contingencies**: Buffer for unexpected costs or changes - **Payroll Taxes**: Government-mandated employment taxes - **Insurance**: Production insurance, equipment insurance, etc. - **Health & Welfare**: Benefits for qualified crew members ## Creating and Managing Fringes PAI offers three distinct methods for adding and managing fringes, each designed for different levels of application: ### Method 1: Using the Fringe Tab (Global Application) The Fringe Tab provides centralized management of all fringes and allows you to create fringes that apply globally across your estimate. - **Accessing the Fringe Tab**: Navigate to the Sheet View of your estimate and select the "Fringes" tab - **Creating a Global Fringe**: - Click the "Add Fringe" button in the Fringe Tab - The fringe is added immediately as an "Unnamed Fringe" - Rename it appropriately - Set the external and internal percentage values - Set a label color for visual identification - **Global Application**: Any fringe created directly in the Fringe Tab automatically applies to all categories, departments, and line items in your estimate - **Default Behavior**: Even if certain categories or departments don't exist yet in your estimate, these global fringes will automatically apply to any new items you add later  ### Method 2: Using Category/Department Fringe Fields (Sectional Application) Fringes can be applied to specific categories or departments through dedicated fringe fields in the Sheet View. - **Accessing the Fringe Fields**: In Sheet View, locate the fringe field at the top of any category or department section - **Adding Fringes**: - Click into the fringe field (or "fringe box") - A dropdown appears showing existing fringes - Select an existing fringe or type to create a new one - **Creating New Fringes**: If you type a unique name in the fringe field: - A new fringe is created for the project with the name you typed - You'll need to navigate to the Fringe Tab to set its percentage values - Note: New fringes created this way are only saved to the current project - **Inheritance**: When fringes are applied to a category or department, any new line items added to that category/department automatically inherit these fringes ![[cat-dept-fringe-field.png]] ![[add-fringe-action.gif]] ### Method 3: Using Line Item Fringe Columns (Individual Application) For the most granular control, fringes can be applied directly to individual line items. - **Enabling Line Item Fringes**: - Line level fringes are hidden by default - Enable them using the columns dropdown in the Sheet View - Select the fringe columns you want to display - **Adding Fringes to Line Items**: - Click into the fringe cell for a specific line item - Select from existing fringes or create a new one - If creating a new fringe, you'll need to configure it in the Fringe Tab - **Override Capability**: Line item fringe settings override any category, department, or global fringes - This allows for exceptions to broader fringe applications - The visual indicators in fringe pills will reflect when some items have custom settings ![[fringe-column-enable.png]] ![[line-item-fringe.png]] ## Fringe Hierarchy and Inheritance PAI uses a hierarchical system for applying and managing fringes. It's important to understand that categories and departments are essentially "views" or grouping mechanisms - line items are tagged with category and department attributes that determine how they're organized in these views. The fringe application hierarchy works as follows: 1. **Global Level**: Fringes created in the Fringe Tab apply to all items by default - When you add a fringe in the Fringe Tab, it automatically applies to every line item - Global fringes will also appear in all category and department fringe fields 2. **Category Level**: Fringe management at the category level affects all line items tagged with that category - Removing a fringe from a category removes it from all line items tagged with that category - Adding a fringe to a category applies it to all line items tagged with that category - New line items tagged with this category will automatically inherit the category's fringe settings 3. **Department Level**: Fringe management at the department level affects all line items tagged with that department - Removing a fringe from a department removes it from all line items tagged with that department - Adding a fringe to a department applies it to all line items tagged with that department - New line items tagged with this department will automatically inherit the department's fringe settings 4. **Line Item Level**: Individual line items can have customized fringe settings - Changes to a line item's fringes only affect that specific line item - Line item fringe settings override higher-level settings for that specific item only This cascading inheritance system creates a flexible yet manageable way to handle percentage-based markups. It allows for both broad application of fringes across an entire estimate and targeted customization when needed. ## Example of Fringe Inheritance If you add an "Insurance" fringe in the Fringe Tab for a new estimate: - All line items automatically receive this Insurance fringe - The fringe appears in all category and department fringe fields - If you remove Insurance from the Equipment category: - It's removed from all departments within Equipment - It's removed from all line items within Equipment - New items added to Equipment won't have the Insurance fringe - Meanwhile, items in other categories (like Labor) still retain the Insurance fringe ## Fringe Calculation Examples Let's see how fringe calculations work in practice: ### Example 1: Basic Fringe Calculation - Line Item: Camera Operator - Base Amount: $800 - Fringe: Production Fee @ 15% - Fringe Amount: $800 × 15% = $120 - Total with Fringe: $920 ### Example 2: Multiple Fringes - Line Item: Camera Rental - Base Amount: $1,500 - Fringe 1: Production Fee @ 15% = $225 - Fringe 2: Insurance @ 3% = $45 - Total with Fringes: $1,770 ### Example 3: Different External/Internal Rates - Line Item: Editor - Base Amount: External $1,200 / Internal $1,000 - Fringe: Production Fee @ 15% External / 0% Internal - External Calculation: $1,200 × 15% = $180 - Internal Calculation: $1,000 × 0% = $0 - Total External with Fringe: $1,380 - Total Internal with Fringe: $1,000 - This difference increases the margin on this line item ## Advanced Fringe Features - **Multiple Applications**: Fringes can be applied to multiple lines, departments, or categories simultaneously - **Linked Values**: You can "link" a fringe to automatically match the external percentage to the internal percentage - This is useful for creating "pass-through" fringes when external and internal subtotals differ - **Margin Impact**: When the same percentage is applied to different external and internal subtotals, this generates either a positive or negative margin on the fringe ## Strategic Uses of Fringes - **Print View Visibility**: Fringes only appear on printed estimates if they have a non-zero external value - **Internal-Only Costs**: You can set the internal percentage to a positive value while keeping the external at 0 - This effectively creates internal costs that aren't billed to the client - Useful for accounting for costs that shouldn't be passed to the client - **Discounts**: Using negative percentage values creates discounts rather than markups - Can be applied to specific categories for targeted pricing strategies - **Contingency Planning**: Apply contingency fringes to volatile cost categories - Helps account for potential overages - Provides buffer for unexpected expenses ## Fringe Transfer to Budget When an estimate is converted to a budget: 1. **Dynamic Relationship Preservation**: Fringes maintain their percentage-based relationship with expense lines throughout the budget lifecycle 2. **Percentage-Based Transfer**: When a fringe is applied to a line item in the estimate, the percentage value (not just the calculated amount) transfers to the budget 3. **Example**: - In the estimate: A labor line with an internal rate of $1,000 has a 20% payroll fee fringe applied, resulting in a $200 fringe cost - During conversion: Both the $1,000 base cost AND the 20% fringe relationship transfer to the budget - After conversion: If you update the labor cost in the budget to $2,000, the fringe automatically recalculates to $400 (maintaining the 20% relationship) 4. **Budget Fringe Management**: - Fringes can be removed or applied to expense lines in the budget - New fringes cannot be created in the budget view - Fringe percentage values cannot be modified in the budget - Available fringes in the budget are limited to the organization's default fringes and any custom fringes created during estimation This approach to fringe management provides financial accuracy throughout the production process, ensuring that all percentage-based costs remain properly calculated regardless of how the underlying expense amounts may change during production. ## Organization Default Fringes For standardized fringe management across projects, see the [[Default Fringes|Organization Default Fringes]] section, which explains how to establish consistent fringe settings at the organizational level. ## Related Topics - [[Projects & Estimates|Projects and Estimates]] - [[02-Core-Concepts/Budgets|Budgets]] - [[Default Fringes|Organization Default Fringes]] - [[Estimates|Estimate Building Process]] © 2025 PAI Tech, Inc. 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