FLSA_White_Paper.pdf

An Oracle White Paper October 2013

Oracle Fusion HRMS (US) Payroll Fair Labor Standards Act Setup

Oracle Fusion US Payroll – Fair Labor Standards Act Setup

Disclaimer The following is intended to outline our general product direction. It is intended for information purposes only, and may not be incorporated into any contract. It is not a commitment to deliver any material, code, or functionality, and should not be relied upon in making purchasing decisions. The development, release, and timing of any features or functionality described for Oracle’s products remains at the sole discretion of Oracle.

Oracle Fusion US Payroll – Fair Labor Standards Act Setup

Disclaimer The following is intended to outline our general product direction. It is intended for information purposes only, and may not be incorporated into any contract. It is not a commitment to deliver any material, code, or functionality, and should not be relied upon in making purchasing decisions. The development, release, and timing of any features or functionality described for Oracle’s products remains at the sole discretion of Oracle.

Oracle Fusion US Payroll – Fair Labor Standards Act Set Up

Table of Contents FLSA Status....................................................................................... 2 Employee Information ........................................................................ 3 Create an Overtime Period – Manage Manage Time Definitions ....................... 5 Associating an Overtime Period to a Payroll ...................................... 10 Override Overtime Period ................................................................ 10 Element Creation ............................................................................. 12 Salary .......................................................................................... 12 Create Salary Basis ...................................................................... 13 Assign Salary Basis to Employee ................................................... 14 Standard Overtime Element ......................................................... 15 Premium Overtime Element ......................................................... 18 Augment Elements ........................................................................... 24


This document is intended to guide the user through the configuration steps necessary for the use of FLSA processing in Oracle Fusion HRMS (US).

FLSA Status Oracle Fusion HRMS (US) determines Fair Labor Standards Act (FLSA) eligibility based on the job assigned to the employee. Employers define the job as non-exempt in the FLSA Status field found in the United States Job Information region (refer to the screenshot given below). The Oracle Fusion HRMS (US) applies the FLSA Overtime calculation rules only when the job for the assignment is nonexempt. If a job exists for the employee, but the FLSA Status is null or if no job is assigned to an employee, the default status for the FLSA Status is exempt. The FLSA Status impacts the premium Overtime calculation if the job is defined as nonexempt. If an employer elects to pay exempt employees overtime, FLSA does NOT control the rate, and the employer can pay at straight time, time and a half, or double time. The employer defines what overtime they want to pay. Under the law, no overtime has to be paid to the exempt employee. In this case, the premium calculation of overtime is not performed since it is defined by the employer. For Fusion, the FLSA Status is stored on the United States Job Information region of Job Details (Navigation ->Workforce Structures ->Jobs ->Manage Jobs).

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Employee Information Oracle Fusion HRMS (US) determines Fair Labor Standards Act (FLSA) eligibility based on the job assigned to the employee. Employers can assign a job to an employee in two places: 

When they hire an employee in the job field under employment information tab.

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

In the Job field under Job Details on the Manage Employment screen.

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Create an Overtime Period – Manage Time Definitions The employer must define one or more workweeks that they use for satisfying FLSA overtime calculations. A workweek must be a regularly recurring period of 168 hours (seven consecutive 24-hour periods). The workweek does not have to be the same as a calendar week or begin at the start of a day. Employers may create multiple time definitions to establish different workweeks for different facilities or groups of employees. In Fusion, the Manage Time Definition task is used to define an overtime period, which specifies the period that the application will u se for FLSA overtime calculations. Employers create overtime periods based on their specific business requirements. For example, if overtime period is a standard 5 day work week, employers would use Static Period in Time and select weekly for the period. If employers have employees that work a nonstandard period of time, employers would use Time Spans to first define the period type. Then define the overtime period and specify the starting date and the length of time of the period.

Follow this setup for Static time definition:

1. Select Create Time Definition. 2. Select the LDG from the list. 3. Select a definition type of Static Period from the list. Navigation > Payroll Calculation > Manage Payroll Process Configuration > Manage Time Definitions

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4. Enter the name of the time definition. 5. Enter the short name of the time definition. 6. Select the appropriate value in the Period Basis field. 7. Enter the number of years for the overtime period in the Number of Years field. The application generates overtime periods for the numbers of years as of the start date. 8. Enter a start date for the overtime period in the First Period Start Date field. 9. Select “Element Allocation” in the Static Time Period Usages Available region. 10. Click on Next and then Submit to save your work.

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Follow this setup for Time Span definition:

1. Select Create Time Definition. 2. Select the LDG from the list. 3. Select a definition type of Static Period from the list. 4. Enter the name of the time definition. 5. Enter the short name of the time definition.

6. Select the Quick Create value in the Period Basis field.

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7. On the Create Period Basis page, provide the required information:

8. Enter the name of the time definition. 9. Enter the short name of the time definition. 10. Select the appropriate value in the Period Type field (Ex: Period type Weekly with Period Unit = 3 (21 days)). Could also specify Period type Daily with Period Unit = 21. 11. Enter a period unit for the time span definition in the Period Unit field. 12. Enter the number of years for the overtime period in the Number of Years field. The application generates overtime periods for the numbers of years as of the start date.

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13. Enter a start date for the overtime period in the First Period Start Date field.

14. Select “Element Allocation” in the Static Time Period Usages Available region.

15. Click on Next and then Click on Generate Time Periods.

16. Click on Submit to save your work.

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Associating an Overtime Period to a Payroll Part of payroll definition is associating a default time definition to it. The time definition specifies the starting date and length of the overtime period used in the calculation of FLSA. By doing this a default overtime period is assigned to a payroll for all the workers who are eligible for overtime. Navigation > Payroll Calculation > Manage Payroll Process Configuration > Manage Payroll Definitions

Override Overtime Period Employers have the option of overriding the overtime period at the employee level. Note: Specifying an overtime value at a lower level will override values at higher levels. Priority order for overtime is: 1. Payroll Assignment 2. Payroll Term 3. Payroll Relationship 4. Payroll Definition

Navigation: Payroll Calculation > Person > Manage Payroll Relationships

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Payroll Assignment Level:

Note: Multiple assignments under same term should not have different overtime periods at the Payroll Term Level.

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Element Creation The following elements must be setup in the payroll system. Navigation: Payroll Calculation > Manage Elements

Salary The user-defined Regular Salary element must be created with a Calculation Rule of Unit X Rate or Flat amount and processing type Recurring.

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Note: New elements feed the seeded balances FLSA Hours and FLSA Earnings when user select “Yes” to FLSA Rules given in the below screenshot.

Create Salary Basis The salary basis allows for the following time periods: Annually Hourly Monthly Period (use the assignment payroll frequency)    

When creating Salary Basis, select hourly for Frequency and attach the Regular Salary element to a salary basis.

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Assign Salary Basis to Employee Once employers have completed setup for Salary Basis, they can assign it to the employee. Navigation: Person Management > Manage Salry

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Note: When users save this record, an element entry with the specified start and end date is automatically generated.

Standard Overtime Element Create the standard Overtime element using a primary classification of Standard Earnings, and a secondary classification of Overtime. Navigation: Payroll Calculation > Earnings and Deductions > Manage Elements

Element must be created as non-recurring. In rules wizard, select “Yes” for question “Can a person have more than one entry of this element in a payroll period?”

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Create the element eligibility link for this element, and attach it to nonexempt employees. For earnings to be associated with a person, employer must create an element entry for non exempt employees. Periodicity must be set to hourly when element entry is created for an employee.

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If the employee has worked overtime on different days in a payroll period, then create an element entry for each overtime entry and provide an Earned Date value as given, in the screenshot below. If an Earned Date is not given, then the total overtime amount is allocated between the overtime periods.

Note: If a rate is not provided in overtime element entry, then hourly rate from salary basis will be considered for overtime calculation. Example: Regular hours worked : 120 Regular rate : $10/hr Overtime Hours : 30 Overtime = (Overtime Hours)* (Regular rate) * (Multiple) = (30) * (10)* (1) = $300

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Premium Overtime Element Create the Premium element using a primary classification of Standard Earnings, and a secondary classification of Premium.

Element must be created as non-recurring and select “Yes” for question “Can a person have more than one entry of this element in a payroll period?”

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Note: An indirect element named ‘OT Premium Adjustment’ is created automatically when creating premium element. Create an element eligibility link for this element and for the base premium element. Premium Calculation Rate Rule

The Premium Calculation Rate Rule is used by Oracle Fusion HRMS (US) to determine the calculation of the premium portion of overtime. The premium portion of overtime is paid at a differential pay rate (being 50% or more) dependent on the business requirements. This rule must be defined as part of the Premium Overtime Element setup. The premium rate (or the “blended rate”) for an employee f or the overtime period is calculated as: (FLSA Earnings) / (FLSA Hours) * 0.5 The two options for the Premium Calculation Rate Rule are defined as: Blended Rate Higher of Blended or Normal Rate

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Fusion captures the default Premium Calculation Rate Rule under the “Calculation Defaults”, which is at the payroll definition level. The default value is “Higher of Blended or Normal Rate”. Note: If user enters a Rate input value, the calculation noted above does not apply as the entry of this input value implies an override. Blended Rate Calculation with Bonus and without Earned Date - Example

An employee earns $10 per hour, works 40 hours, 10 hours overtime, and earns a bonus of $100 which impacts blended rate. Straight Time and Straight Time Overtime = (40 hours * $10/hour) + (10 hours * $10/hour) = $500 Premium Rate = [( 50 hours worked x $10/hour) + $100 bonus] / 50 hours = $12/hour * 0.5 = $6/hour Premium Amount = $6/hour x 10 hours of overtime = $60 Total Amount = $500 (Straight Time and Straight Time Overtime) + $100 (Bonus) + 60 (Premium) = $660 Blended Rate Calculation with Bonus and Earned Date - Example

Regular hours worked : 120 Overtime Hours : 30 Regular rate : $10/hour Bonus : $1500 on 14-Jan-2010 Pay Period : semi-monthly (Jan 1 – Jan 15)

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Element level representation:

Blended Rate Calculation with Bonus:

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FLSA Premium Calculation

Premium is nothing but the amount paid to the employee with Blended rate for the overtime hours worked. Premium = Overtime Hours * Blended Rate * Multiple Default Multiple factor for premium amount calculation is 0.5.

*Blended Rate will be used for premium calculation Blended Rate Calculation for Commission only employee with Bonus and without Earned Date - Example

Information: Salary = $0/hour Weekly Commission = $2000 Bonus = $400 40 hours per pay period No date earned Only one Assignment Pay Period = Weekly (Jan 1 – Jan 7) Overtime Period = Sunday to Saturday (1 week)        

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

8 Overtime hours

Result for Pay Period: Wages (Commission + Bonus): $2400 FLSA Premium Rate: $2400/48 = $50 Premium Overtime: 8*$50 *0.5 = $200 FLSA Premium Adjustment Element

The FLSA Premium Adjustment Element is required in Fusion. The FLSA Premium Adjustment element creates this adjustment for the premium portion of overtime for the entire overtime period. Further, a proration event is automatically attached to this element. Oracle Fusion HRMS (US) creates a Commission Premium Adjustment element for Non-recurring elements defined using the Premium calculation rule. Note: Element entry is created automatically for the adjustment element if there is any overlap in overtime irrespective whether adjustment for overtime premium is available or not. We need to create eligibility link for this element manually. If eligibility link is not created then system will not allow creating element entry for the base element (Premium earning element).

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Flow Diagram

Augment Elements Augments are used to refer to amounts paid that are in addition to the employee's regular rate of pay and that are considered non-discretionary, such as a commission or bonus. The FLSA functionality prorates the augment amounts across all periods during which they were earned. For example, employer pays employee commissions monthly and pays the salary semi-monthly. The commission is evenly divided over the pay periods during the period it was earned with 50% allocated to each semimonthly pay period. The following steps show how to create an augment element:

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Create the Augment element using a primary classification of Supplemental Earnings, and the appropriate secondary classification.

Processing Type for Augment element must be nonrecurring. The Augment question “Prorate this earning across all periods during which it is was earned and consider it for FLSA calculations, such as for commissions, bonuses, incentives, and other nondiscretionary earnings?” is available only for nonrecurring supplemental earning elements.

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If the augment question value is Yes, then the following processing rules are automatically set: 1. Calculation rule will be defaulted to Flat Amount. 2. An indirect element named ‘Commission Premium Adjustment’ is created when the augment element is defined. 3. Two new input values Earned Start Date and Earned End Date are created.

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Create an eligibility link for “Commission Premium Adjustment” and for the base supplemental element. Create Element Entry

For earnings to be associated with a person, employer must create an element entry for the eligible employees and base augment element (Commission).

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The Earned End Date element entry value must be always less than the base augment element entry’s effective start date.

Note: Once the base augment element entry is created, Oracle Fusion creates one more element entry for “Commission Premium Adjustment” with an effective start date as base augment’s earned start date element entry value and effective end date as base augment’s earned end date element entry value as given in the below screenshot.

User must run the retropay process for the payroll period in which the base augment element was created. The retropay process picks the “Commission Premium Adjustment” element and creates retropay entries for the adjusted premium amount.

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FLSA_White_Paper.pdf

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