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Elements and Links




Defining Elements



We have talked a little about elements before. It’s a placeholder to hold the values that can be assigned to store an entity of payroll; like an earning, a deduction, a life insurance premium etc. Elements are the building block of the payroll. If we look at a payslip, we will see different types of pay, like the basic, travel allowance, Medical allowance, deductions etc. Those are all elements.

Before going ahead and creating elements, we must make sure we list down all the elements that we need, along with their names, reporting names (that will appear on the pay slip), type of the element etc.

Horizontal Scroll:  NOTE A good payroll implementation needs good design and planning. It is essential to create a document listing all the elements, along with its related attributes before starting to create them, in order to avoid future issues.

There are two ways to create an element. 

  • Use the traditional Element screen
  • Use a template

Let's learn about the traditional way first.

Using Traditional Way

Before creating anything related to a date tracked table, we must date track to a date that will be able to catch all our historic information. What's that date? May be 01-JAN-1951, or 01-JAN-1980? We can use any date which is well enough in past that all our transactions could be recorded on or after that date. The most popularly used date is, 01-JAN-1951. We must date track to that date we have decided to go with; before entering any information.

Now, let’s open the elements screen.

 Responsibility: HRMS Manager

Navigation: Total Compensation -> Basics -> Element Description

Steps: Create a new record and start filling in the details.


Figure 5 Define Elements


(Figure 5.5 – Define Elements)

Name

The name of the element. One should always use meaningful names. The best practice is to use suffixes to identify types of elements. For an example, element name starting with E_ can depict an Earning Element, similarly D_, I_, T_ etc can be used to name the elements of types deductions, Information and Third Party payments respectively.

Reporting Name

This name must be more meaningful; as this appears on the pay slips and statement of earnings.

Description

Information purpose only.

Primary Classification

Choose a Primary Classification that suits the element the most. We will learn more about this later in this chapter.

Benefit Classification

Choose one if required.

Effective Date

This should give us the date we have date tracked to. The Start date of the record. This is populated automatically.

Currency

Choose one currency, if the element's currency is different than our Business group's default currency.

Age

An eligibility Indicator. In case we want the element to be available, based on age criterion.

Length Of Service

Works the same way as age, however on Length of Service criterion.

Standard

If standard box is checked, system creates an entry to all the employees who are eligible for the element automatically.

As the eligibility of an element is determined through element links, the standard check box can be overridden at the element links level.

An element must not be Non Recurring or multiple entries must not be allowed in order to be standard. 

Further Information

It's a DFF on the Elements table. It can store additional information, which can be used in fast formulas.

Type

Recurring: Elements that appear in every payroll cycle, like Basic Salary
Non Recurring: Elements that do not appear in every payroll cycle, like Overtime

Termination Dates

This determines, if an employee is terminated, how long this element should get processed.
Actual Term date: The element ends as of Termination Date
Last Standard Process date: The element ends as of the pay period end date on or after the termination date
Final Close Date: The element ends as of the final settlement date mentioned, as per the termination record.

Multiple Entries Allowed

This enables an element to be entered more than once in one pay period. Example: Overtime element, as overtime can be entered multiple times in a week’s time. On the other hand, Regular salary can not be entered multiple times in a period. There should be just one entry per pay period.

Closed For Entry

This will make the element unavailable for any future use. However the existing entries will work as expected.

In case we wish to stop using an element, this is the flag to be updated. End dating or Purging are not good practice for elements.

Process in Run

If not checked, the element will not be processed as part of Payroll run.

Indirect Result

This flag is checked, if any other element seeds any value to this one for usage. We will discuss more about these in Formula results section of this chapter.

Third Party Payment

This flag is used, if the element is associated with third party payments.

Skip Rules

This accepts a FF. The FF returns a Y or N. Based on the return value; the element is included on a payroll run.

The skip rule stands useful when you wish to include the element on specific cases only. For an example, you wish to pay the Bonus element only if the YTD salary is greater than $75,000.

Priority

A number based on which it is picked by the payroll process. The one with the smallest priority number gets picked up first. A Default value is always fed based on the classification chosen for the element. However, we can change it if any specific requirement forces it to be updated.

Especially in case of Indirect results, where one element feeds values to another, the feeding one should be processed first and hence must have a smaller number.

 

Now, Lets save the changes and move to buttons.

 

Input Values

We know that the elements store values. However the actual places where the values are stored / recorded by the elements are known as Input Values. These are the place holders that keep the values that can be used for calculations related to payroll. One element can have one or more input values attached to it. The input values store the different values that are used for the calculation of the final value of the element. In some cases one Input value for an element might feed values to another element for its calculations. Those are called indirect results. 

Let's play an example; we are storing the Overtime with an element. So what are the things we should track? One Input Value storing the number of hours we have worked, and another to store the hourly overtime rate of the employee. That will give us the money to be credited to the employee's payroll. So will need another Input value to store the final amount.

The one input value that stores the final amount must be stored in an Input value with name "Pay Value".

Horizontal Scroll:  NOTE Oracle Payroll recognizes the final input value by the name "Pay Value". This input value cannot be set as required, because in most cases its value is derived from the value of other input values of the same / other elements.

Let's navigate through the form. See Figure 5.6 – Input Values.

Figure 6 Input Values


 (Figure 5.6 – Input Values)

 Name

Name of the Input Value.

 Units

It can be one of these: Money, Hours, number etc. A pay value should always have the unit as Money.

 Sequence

This is the order in which the elements appear in the Element Entries Inputs screen.

 Required

Makes the Input value Mandatory for the element. This means, the entry will not be saved, unless this value is entered.

 User Enterable

Makes the Input value user enterable. Like the number of hours and Overtime hourly rates.

 Database Items

Creates a database item for this Input value.

 Default

Takes the default value for the Input value.

 Hot Default

Updates the existing entries, if the default values are changed. For an example, if a Default value for overtime hourly rate is changed, it will enforce all the existing unprocessed entries to be updated, if the hot default is chosen. If it’s not checked, then it will just use the new default going forward; without updating the existing entries.

 Lookup

Use a look up for validation of the Input values. The Entered value must be in the look up codes. This is like an extra set of validations attached to the data entered to the input value.

 Formula

We can use a formula to validate the input value.

 Minimum and Maximum

Takes the minimum or maximum of the allowed values.

 Warning or Error

We can use a Warning or Error message here. The warning will appear on the payroll process results, if validation of the data fails.

 Effective Dates

The effective date of the Input value.

 

Classifications

Choosing a correct primary and secondary classification is very important in order to ensure the elements behave the way they are designed to. The primary classification is a seeded functionality, however the secondary classification is customizable, and we can add new secondary classifications based on our business needs. Here is the list of Primary classifications, the categories and their meanings.

Classifications

Categories

Descriptions

 Earnings

Regular, Overtime , Premium, Shift Pay, Student Earnings

Earnings based on the hours worked. The salaries, Overtime etc are the direct result of the labour, and termed as Earnings.

Supplemental Earnings

Dismissal Payments, Educational Assistance, Deferred Compensation Plans, Jury Duty Pay, Moving Expense Reimbursement, Pensions/ annuities, Awards n Prizes, Bonuses, Commissions, cafeteria Plans, Deceased Employee Wages, Sick Pay, Travel Expense Reimbursements, Vacation Pay

The special type of earnings that one receives, along with the Earnings. Like Bonus, awards etc. Even though these are type of earning, these are additional cash to the employee, other than the ones entitled. 

So technically, any cash numeration, which is not a type of earning is called Supplemental earnings

Imputed Earnings

Group Term Life Insurance, Personal Use of Company Car, Non-Cash Awards

The Non Cash types of earnings are listed as Imputed Earnings. We’ll learn more about these in Advanced benefits.

PTO Accruals

Vacation, Sick

These are the Paid Time Off (PTO) accrued by the employee. Usually enterprises give the employees an amount of days to accrue once s/he completes a month / year as an employee. Those vacations are paid ones. So the employee keeps gathering them and uses them whenever s/he needs them. Those accruals are stored with PTO accruals.

Voluntary Deductions

 N/A

These are the deductions that are done as part of any loan payment / insurance premium etc.

Involuntary Deductions

Garnishments, Bankruptcy order, Federal Tax Levy, State Tax Levy, Local Tax Levy, Child Support Order, Spousal support order, Alimony, School Loan, Credit Debt, Employee requested payments

The Involuntary deductions where the employees pay the amount based on some Alimony or by court order or by any third party garnishment orders.

Pre-Tax Deductions

differed Comp 401K, Health care 125, dependent care 125

The deductions that happen before taxes are applied. Like Health care and retirement plan premiums / rates. 

Tax Deductions

Federal tax, state tax, Local tax

The employee taxes for the Country or state or even local taxes come under these.

Employer Taxes

Federal tax, state tax, Local tax 

The employer taxes.

Employer Liabilities

Benefits, Overhead

These are the non tax liabilities to the employer that gives health coverage benefits and usable things to the employees like a safety harness.

Tax-credit

 N/A

These are the credits that are paid back to the employees as part of some accreditations.

Non-Payroll Payments 

Expense Reimbursement

These are not actually earnings, hence not taxable. These appear separate on earning report, as these expenses are just being reimbursed, not an additional payment.

Information

Absence Hours, Straight-Time Overtime Hours, Tax Balance, Labour hours, Regular Hours

These elements are not monetary types. They just hold the counts for reporting purposes.

 

Formula Results

Fast Formulas can be used for various purposes like, Calculating Pay values, validating entries, Skipping a payroll etc. There are precise places where we can use a particular FF. We will concentrate on the most widely used one; the payroll calculation formula.

Let's see the form, and discuss about the various possibilities. See Figure 5.7 – Formula Results.

Responsibility: HRMS Manager

Navigation: Total Compensation -> Basics -> Formula Results

Steps: Query for the Element in concern

 

Figure 7 Formula Results



(Figure 5.7 – Formula Results)

 

 Element Name

 Name of the element.

 Classification

 It is auto populated with the primary classification of the chosen element

 Description

 It is auto populated with the description of the chosen element

 Processing Rule Name

 This is a LOV with assignment status types of employees (PER_ASS_SYS_STATUS lookup). Choose a ‘standard’ rule for standard processing. Also choose any other status type, if the processing rules for the element changes with a change in that status change.

 Processing Formula Name

 Name of the formula to be used against the status change

 Formula Result Name

 Name of the result that should be linked to input value of an element. This is a LOV, populated with the return values of the FF. If the FF has three return values, those three will be populated in the LOV.

 Type

 Type of formula result. We will discuss about it later in this chapter.

 Element

 The element to which the result is being passed.

 Input Value

 The input value in use.

 Units

 Auto populated based on the chosen unit

 Message

In case the result type is Message, the message needs to be added here.

 

Formula Result Types

A payroll calculation formula is capable of returning many values. And based on the need, the return values are used, either in the element it is called from or passed on to another element for further calculations. There are cases, where we would need one element to pass a value to another element, based on which the calculation of the later will take place. For an example, the bonus can be calculated as 15% of Regular Salary, and the final amount (pay value) of Regular Salary can be calculated by the fast formula attached to the basic and then fed into the Bonus element for its calculation. Let’s look at the different ways we can use a return value of a fast formula.

Direct Result: This is used when we are updating the pay value of the element being evaluated.

Indirect Result: This is used when the calculation result of one of the Input Value of the element being evaluated needs to be fed to another element's input value. The later then takes it as an Input and processes its calculation. Continuing with our example, If Bonus needs to be 15% of the regular Salary. Regular Salary might have an Indirect result to feed the value to the Bonus element. Bonus element can then take the value and calculate 15% of the value and use that amount as pay value. So to pass the value from Regular salary to Bonus element, we can use the Indirect Results.

Order Incorrect: This result updates the sub priority of the element selected in element field.

Stop: This formula result uses the effective date of the payroll run to put an end date on a recurring entry of this or another element (which must be defined with multiple entries not allowed.)

Update Recurring Entry: This result updates recurring entries of this or another element. The receiving element must be defined with multiple entries not allowed unless we are passing a recurring element's entries to itself, which is updating another entry of the same element.

Message: Sometimes, we want a simple message to be displayed based on the calculation. That can be done using a Message type.

6.7.6 Laws of Elements

  • We can make an element standard, only if it’s recurring and multiple entries are not allowed.
  • A category type field must be entered in the DFF for all elements. The LOV is populated from the look up types: "US_EARNINGS" and "US_SUPPLEMENTAL_EARNINGS".
  • Never check "Closed for Entry" for a standard element. It will create issues with Hiring and terminations.
  • For validation, we can use any one of the three possibilities (Lookup / formula/ min and max).

 

Using Earning Templates

As the elements are of different types, there are two templates in Oracle payroll that helps us create elements and a lot of other related things. These templates save time, make the elements standardized and easy to manage. The two templates are called, Earnings and Deductions.

Let’s start with earnings template first. It is more or less a type of classification. However using this template to create an earning type of element creates the following things in Oracle Payroll.

  • One element with the same name as earning
  • Two support elements (one special input and one Adjustment/ special feature)
  • One Fast Formula
  • One Balance
  • The input values

So let's configure the earning

Responsibility: HRMS Manager

Navigation: Total Compensation -> Basics -> Earnings

Steps: Create a new record and start filling in the details. See Figure 5.8 – Earnings Template.

 

Figure 8 Earnings Template


(Figure 5.8 – Earnings Template)

 

Name

Name of the Element

Reporting Name

The Name that appears on the Pay slips and statements of earnings

Description

Just a description of the element

Classification

The Primary classification

Category

This is a sub type of Primary Classification

Priority

The order in which the data is going to be processed

Overtime Base

If this Box is checked, it takes the element as the base for the Overtime entries

FLSA Hours

This is used in US localizations only. If this Box is checked, it takes the initial 8 hours as regular and the next hours as Overtime, as per FLSA rules in US. FLSA stands for Fair Labour Standards Act.

Reduce Regular

In a case where we want the regular hours to be divided into "Regular Worked" and "Regular Non Worked" hours, we should use this. For an example, if there is a full time employee appointed for 40 hours a week, but he has worked for only 36 hours as per the time sheets, then 36 hours will be Regular worked, and 4 hours will be the regular non worked hours.

Standard Link 

This enables an element to be standard. If the box is checked, the element gets added to all eligible employees automatically.  

Standard Calculation Rule

This defines the way the Pay value calculation will be done.

Type

Recurring / Non Recurring. Same as we discussed in Elements screen

Termination

The date until which the element will be used.

Deduction Processing

We can choose one of the three Tax deduction types:
Tax Only: Only Tax deductions apply.
Tax and Pre-Tax only: Only Tax and Pre-Tax deductions apply.
Default: All types of Tax deductions apply.

Separate Check

Select Yes, if we want a separate check to be issued just for this element.

 

Let's talk about the standard Calculation rule a little bit. There are four predefined standard calculation rules in place:

·         Flat amount: The Earning is a flat amount.

·         Hours X Rate: The Earning is a multiple of number of Hours worked and Rate per hour.

·         Hours X Rate Multiple: This is as good as Hours X Rate, however multiple entries are allowed.

·         Percentage of Regular Earning: The Earning is a percentage of the Regular Earning.

 

Horizontal Scroll:  NOTE In a case, our requirement calls for something other than these four, then we should go to Formula results screen (Total Compensation -> Basics -> Formula Results) and query for the Element. Purge that record and create a new record with the required rule. The purging is needed just because, we created the element with a Template, and the template creates a row in Formula results screen automatically.

Now, what about the two special elements we talked about earlier? The two elements are used for adjustments. For an example, if an employee’s regular salary is entered, and now, we want the salary to be increased by $50 just for this pay period, because of some adjustments. How do we do that? We can use the special Input elements. It can have two input values:

·         Replacement Value: This amount, if entered will replace the amount filled in with the original element.

·         Adjustment Value: This amount, if entered will be adjusted against the amount filled in with the original element.

To continue the same example further, we will use the replacement amount and put the new regular salary there, or will put in $50 in the adjustment value, so that it will be added to the original element while processing.

Using Deductions Template

What’s a deduction? It's the amount that needs to be deducted from the payroll. When we consider deductions, there are two major types:

  • Tax Deductions
  • Non Tax Deductions

We know what tax deductions are. These are the taxes we pay. Oracle has tied up with a vendor called Vertex, who takes care of all the taxes in Oracle Payroll in US. So we do not have to worry about the tax percentage and everything as of now. Oracle has got it covered. It will get cut from the employee's payroll automatically, based on his work address and home address. For all other localizations, there are specific taxing rules that are to be followed.

What are the Non Tax Deductions? These are the voluntary and involuntary deductions. Like a Life Insurance Premium / rate or a loan amount to be paid or a debt to be paid back to the company etc. So to configure these types of non tax deductions, we can either go for an element creation or create it via a template. Let's see how the template looks like. See Figure 5.9 – Deductions Template.

Responsibility: HRMS Manager

Navigation: Total Compensation -> Basics -> Deductions

Steps: Create a new record and start filling in the details.

 

Figure 9 Deductions Template


(Figure 5.9 – Deductions Template)

 

 

 Name

Name of the Element.

 Reporting Name

Another Name, that displays on the Pay slips and statements of earnings. 

 Description

Description of the element.

 Classification

The Primary classification.

 Category

This is a subtype of primary classification.

 Benefit Classification

This is another set of classification in place that can be used to handle benefits level deductions.

 Type

Recurring / Non Recurring - same as explained in elements.

 Start Rule

On Entry: The deductions begin as of the date on which the deductions are recorded.
Earning Threshold: The deductions begin only after the Gross Earning Balance reaches a threshold.

Run Type

Regular: It will be applied only to the Regular Runs.
Supplemental: It will be applied both to regular and supplemental Runs.

Termination

The date until which the element will be used (same as explained in Elements).

 Standard Check box

Appears on all eligible employee payrolls.

 Total Reached Stop rule

The Deductions stop once the deduction balance reaches a specific amount.

Series EE Bonds

Check if the deductions are related to series EE Bonds.

 Buy Back Check Box

This is used in Retirement plans.

 Deferred Compensation Rules

Eligible employees may elect to participate in a deferred compensation plan (e.g., 401(k), 457) or contribute to a tax–sheltered annuity (e.g., 403(b)) rather than receive the full amount of their salary in cash.  Participation in a deferred compensation plan is usually a pre–tax contribution that reduces the employee’s taxable income. The maximum amount of salary that an employee may elect to defer and have contributed to a plan is subject to change yearly. In addition to Pre-tax contributions, employees may make after–tax contributions once the plan’s contribution limit has been reached. Employers may contribute matching amounts (the employer’s matching contribution does not have to equal the employee’s contribution).

Once the deduction is created and saved, Oracle Payroll automatically generates both the pre- and post-tax deduction elements (if applicable). Oracle Payroll requires us to link and enter values for these elements separately. Deferred compensation elements and links only need to be created once for an organization. Individual deferred compensation values must be entered and maintained for each individual assignment as dictated by ones benefit elections policy.

 Catch Up Processing

403(b) and 457 catch–up provisions allow eligible employees to exceed a plan’s maximum pre–tax deferral limit.
Oracle Payroll supports deferred compensation plans with catch–up provisions (e.g., 403(b) and 457). By enabling the appropriate catch–up provision, Oracle Payroll will automatically adjust an eligible employee’s maximum pre–tax contribution limit. We can then adjust the employee’s 403(b) or 457 deductions accordingly.

 Rules

This determines the amount to be deducted.

  • Flat Amount: The deduction is a flat amount
  • %Earnings: It’s a percentage of the total earnings the employee earns
  • Payroll Tables: It can be obtained from a user table. The table name in the Payroll Table text box must be mentioned, if this option is being selected
  • Benefits Table: It can be obtained from the Benefits Module. Based on the Coverage and plan the employee is enrolled in

 Insufficient Funds

With this option, system determines the action, if there are not enough funds to pay off the entire deduction.

Arrearage: This options tells the system to use the remaining amounts as arrears for forthcoming months

Partial Deduction: instructs the system to deduct the money partially, period after period.

 

In few cases, the deductions have to be made based on a particular frequency. For an example, an enterprise may wish to deduct $10 towards Company Car as of first pay period of every month. So, for an employee in weekly payroll, the $10 will get cut as of first week of every month; and for all other pay periods in that month, there will be no deductions towards the Company Car.

For requirements like these, Deductions have a mechanism known as Frequency Rules. One can choose the desired number of times deductions are to happen in one month, for each payroll. To satisfy the requirement in the example cited earlier, we must go to frequency rules button on the Deductions screen, and check the check box 1 against the required payroll. Here the number one signifies the first week of the month. Like wise one must check the numbers of the week on which the deductions are to be made.

Horizontal Scroll:  NOTE It is always advised to create elements through Templates, unless it’s very important to do it through the element forms.

Defining Links



Once the elements are in place, some eligibility criteria must be defined to help the system determine, whether an element can be attached to a particular employee or not. That concept is known as linking. Element links help us define the criteria using a set of indicative data. The elements will be visible on the element entry screen of an employee, only if s/he passes the eligibility criteria. One element must have at least one, and can have more than one links in order to be attached to an employee’s element entry.

The indicative data with which the eligibility criteria of an element link can be defined are:

  • Organization
  • People Group
  • Job
  • Position
  • Grade
  • Location
  • Employment Category
  • Payroll
  • Salary Basis

Responsibility: HRMS Manager

Navigation: Total Compensation -> Basics -> Link

Steps: Create a new record and populate the details. See Figure 5.10 – Element Links.

Figure 10 Element Links


(Figure 5.10 – Element Links)

Element Name

 Name of the element for which the link is being created

Standard

 If checked, It creates an entry for all eligible employees

Eligibility Criteria

 Choose the set of eligibility criteria for the element.

Link to All Payrolls

 If Checked, the element becomes available to all eligible employees in all payroll

Costing

  • Not Costed: The element is not costed against any account
  • Costed: The element is costed. Overriding the costing at lower level is allowed
  • Fixed Costed: The element is costed. Overriding is not allowed at lower levels. If this is chosen, the account details for the “to be costed “account must be entered here.
  • Distributed: The element is costed, however using a distribution set.

 Transfer to GL

This check box makes sure that the cost is transferred to GL once the payroll is run and ‘Transfer to GL’ process is run.

 Qualifying conditions

Qualifying conditions like age and length of service defined at the element description level can be overridden here for a particular set of employees, who satisfy the link.

 Input Values

The values given at the element description level can be overridden here. One addition on this screen is the ‘Costed’ checkbox next to each input value.

Remember, if we Override the Input Value default here, it does not change the default on the elements screen. The new Default will only be applied to the entries with the given link. All other links to the same elements remain intact.

Horizontal Scroll:  NOTE If we override the Input Value default/ qualifying conditions at a particular link, it does not change the default on the elements screen. The new default will only be applied to the entries with the given link. All other links to the same elements remain unchanged.
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