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Before getting started, we must know the terms that are going to be used in this chapter. We must know the processes and taxonomy in order to understand the basics easily, so here we go.


An element is the building block of payroll. It is a place holder to contain values, which will be used for a Payroll processing. The primary usage is to embed a type of income or deduction into an element, so that the entries can be made on the Employee's record related to the element. Later with the entries, we can calculate the payroll.

For an example, if we were to give Bonus to 5 employees in our organization. We will create an element for Bonus. The Bonus element can be attached to the 5 employees. While processing Payroll, the Payroll engine will give the bonus, only if there is the Bonus element attached. So that only the chosen five employees get the bonus, and others don't.

An element can be of two types: Recurring and Non-recurring. Recurring are the ones that are processed for each and every pay period, and the ones that are paid once in a while are called non-recurring. From the bonus example above, Bonus is a non-recurring one. So Regular Salary will be a recurring element and Bonus will be a non Recurring one.

In a real world, Elements serve a lot of purposes. Like, 

  • Earnings and Deductions: Salary, Allowances, Bonus, Loans
  • Taxes: State taxes, Country level taxes
  • Benefits: Vacations, Sick pays, Paid Absences, Pension plans, Employee Stock options, Insurance premiums / rates
  • Supplementary: Mobile Phones, Computers, Uniforms provided by the company, Expense reimbursements
  • Information: Leave adjustments, Loan Amount, Accruals etc.

Element Links

Element links are like qualifiers. They determine if the element is linkable to an employee or not. So it gives us an extra handle, where we can specify who all can be eligible to get this element attached. To take our Bonus example further, if we define a criteria on the Bonus element, so that only those 5 employees can get the Bonus element, then it will be easy for us to maintain. The Criteria can be defined in the element links. There is a lot to it, rather just defining criteria, we will learn more about it in Configuration section.


An earning is a type of element which is as simple as what it means in English. This is a type of element which actually Debits the amount value attached to it. For an example, Regular salary/ Bonus will be an earning. In Oracle Payroll prospective, Earning is a template form. We will learn more about it when we start configuring Payroll.


This is a type of element as well; however it credits the amount value. These are used to deduct some amount from our payroll. For an example, our Medical Insurance amount (Rate) is a deduction that gets credited from our gross income. Our Tax amount, Provident fund etc are deductions. To generalize, anything that gets deducted from your Salary is known as a deduction. This is exactly opposite to Earnings.


A Balance is an aggregate of one or more elements that have a numerical value attached to it. These are created for tracking purpose; to track the aggregated values with different dimensions.

OK, let’s discuss that a little more with an example. Let's take an example of Bonus again. We will create a balance with name BONUS_BAL. We will attach my Bonus element to it. We would expect the BONUS_BAL to answer the following questions for me.

  • How much Bonus did we pay in the fiscal year of 2010?
  • How much Bonus did we pay in 3rd Quarter of 2010?
  • How much Bonus did Jean receive in her entire length of service?

So these parameters Fiscal Year, Quarter, Length of service, these are all Dimensions, based on which we can get a value. If we draw Bonus as X axis, Time in Y axis, and plot a graph, it will give us a point for the Quarter of 2010, Right? So the axis here is one dimension. Similarly we can put dimensions of many types. So bonus is usually a Multi-Dimensional architecture of a collection of data; where Data being the numbers attached to the elements.

So to rephrase Balance, we will say, it’s a collection / summation of one or more elements, which can be used to retrieve data with multiple dimensions. 

Why would we need that? In our pay slip, there is something called as Income Tax deduction, and something called as YTD (Year To Date) Deduction. Where is that YTD Deduction coming from? It’s coming from the balance attached to the Income Tax element, and the dimension we are using is Year to date, that is for the fiscal year being evaluated. Clear? Nice. This is just a simple example of balance usages; there are actually a lot of usages of balances, and we will discuss them while discussing about the Payroll implementation steps. 

Payment Methods

An employee gets options related to the way he wants to get paid. Those options can be: 

  • Check Payment
  • Direct Deposits (Bank Account credits)
  • Garnishments (Third Party Payments; for an example, a court order to pay $200 every month to someone / charity)
  • Cash, although paying by cash is not a very standard practice, few of the countries allow paying your employees by cash.

Again based on the localization of the payroll, we need to use automatic money transfer via a certain Media, like NACHA / BACS / ACB. These are needed for direct deposits. The other two (Check Payment and Garnishments) are clearly driven through the checks, however the recipient changes. An employee can also have liberty to divide his salary in two different accounts.

For an Example, If Joe has two accounts, one checking and one savings, and then he might request his salary like this:

  • Give me a check for $300.
  • Then $500 should go as a garnishment to pay out my ex-spouse, as per court order.
  • Rest of the money should go to my Savings account.

Here Joe uses three different payment methods.

Payroll Frequency

Every enterprise runs on a schedule of payroll frequencies. These are the frequencies on which the payroll is processed and payments are made. The Frequency again depends upon the type of payroll a particular employee is on. Examples are:

  • Monthly
  • Semi-Monthly
  • Bi-weekly
  • Weekly

So if Joe is entitled to the Monthly payroll, he will get paid every month. So his payroll frequency is monthly.

Consolidation Sets

If an enterprise has three payroll cycles; Monthly, Semi Monthly and weekly;  it means,  it has employees who are paid every week / once in a fortnight / once a month. This also means it will have to process at least one payroll every week (weekly). Every alternate weeks, it will have to process two payrolls (one weekly and one semi-monthly), and all three on the last week of the month. Its not just about the payroll process, the enterprise must process post processing steps for each one of them. 

To summarize, the payroll processing team of the enterprise will have to repeat a set of task multiple times for each payroll. To solve problems like this, Oracle E-Biz uses a methodology called Consolidation set. A set of payrolls can be combined and grouped together through a consolidation set and different processes can be run on the consolidation set, rather running it individually on each payroll. It will pick the payrolls processed between the provided date range and will execute the rest of the processes for all of them at once. So payrolls with similar timelines can be clubbed together in a group called Consolidation set.


The Process with which the Pay check amounts are segregated among the various departments and cost centers in any Enterprise is known as Costing. 

Let's take an example of Mr. Joe, who is working in our enterprise since last 7 years. Now he is a Project Manager, and his billing (his pay check) should be paid by the department for which he is working. Similarly Ms. Jean, who is a contractor, and has been hired to do some market research, should get paid by the department of Sales.

We know that after the payroll is run, we are going to send these reports to General Ledger aka GL, so that the books/accounts are updated accordingly. However how do we specify, which pay check is paid by which department? There will be situations where we want the cost to be paid by the Admin cost centre, as the job was department independent. So to cater all these requirements, we have a concept called Costing.

We define a cost allocation flex field just for the same purpose. It will have different segments where we can attach my cost; like, Project, Product. Cost centre, Account Code etc. These are highly based on my enterprise hierarchy / design. With that in hand, we can start assigning costing to the payrolls. We will also have places where we will be able to override costing. We will learn more about it while configuring those.

The General Ledger has a Flex field called: Accounting Flex field. In a best case design, the accounting Flex field and the cost allocation flex field should match. However for all cases, we need to map these two flex fields in order to link the accounts from HR end to the GL end. There is a form in HRMS, where the Accounting flex field is mapped to the Cost Allocation Flex Field via segments. That process is known as the GL Mapping.

Electronic payments

In case of direct deposits, when the payroll processing is done, the bank must be informed to transfer the amounts to the respective accounts. So how do we do it?

In most countries, all banks have an association through which they manage electronic transfers, like NACHA (National Automated Clearing House Association) in US and BACS (Bankers' automated clearing services) in UK. The association determines a format and an electronic data transfer methodology with which one can communicate to the bank to fill in money into the employee accounts.

As part of Post Processing of payroll, we usually run a report that prints the Account number and the Amount in a desired format, based on the localization (either for NACHA or BACS). That report is then sent to the bank using a preferred media, which is again specific to localization. That report is then used by the bank to credit the Money in to the mentioned accounts. The entire process of generating a Payment report and sending it to bank is called the Electronic Payment data Transfer.

Element Classifications

There are a set of predefined classifications available with Oracle Payroll, which can be used to represent the characteristics of a particular element. Each and every element must have a classification attached to it. The Classification in turn depicts the way the element behaves. For an example, an Element of classification type ‘earning’, tells us that it’s an Earning, and the money accumulated in it will be added to the pay check. An element with Classification as "Information", tells us it’s just for the information purpose only, and will not be holding any money.

Let's say, we have a primary classification that has 10 elements associated to it. Out of those 10 elements, 5 elements are very similar. They belong to the same payroll entity/ they have similar usage. In this case, we can define a secondary classification that will help us group the similar elements together. Although Secondary classifications are not mandatory they are very useful in Balance configuration. As an example, a Travel Allowance, House Rent Allowance, uniform allowance are of type Earning (Primary Classification) and are type Paid Allowance (secondary classification).