11g Release 6 (11.1.6)
Part Number E20378-04
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Oracle® Fusion
Applications Coexistence for HCM Implementation Guide 11g Release 6 (11.1.6) Part Number E20378-04 |
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This chapter contains the following:
Enterprise Structures for HCM Coexistence: Points to Consider
Legislative Data Groups: Explained
Payroll Statutory Units, Legal Employers, and Tax Reporting Units: How They Work Together
FAQs for Define Legal Entities for Human Capital Management
For HCM coexistence, you do not need to specify Oracle Fusion enterprise structures in as much detail as you would for a full install. This topic identifies the HCM coexistence requirements for enterprise structures.
The enterprise is defined by your service provider. You can change the enterprise name, if appropriate; however, all other enterprise values must be left as specified by the service provider. In particular, you must use the two-tier multiple-assignment employment model when using HCM coexistence.
Create a legislative data group for each currency in which you pay workers. (If you use Oracle Fusion Workforce Compensation, you later define a set of elements for each legislative data group.)
The minimum requirement is to create a legal entity for each country in which you pay workers. You must define each legal entity as both a legal employer and a payroll statutory unit (PSU), and associate the relevant legislative data group with the PSU. (Any attempt to load element entries will fail if you do not define the legal entity as a PSU.) Do not change employment-model settings inherited from the enterprise.
If you are using Oracle E-Business Suite HRMS, you specify a default legal entity for each business group when mapping data between your source application and Oracle Fusion. You cannot map multiple business groups to a single legal entity.
Departments are uploaded from the source application when you perform the task Load HCM Data for Coexistence to load work structures. Each E-Business Suite HR Organization is uploaded to Oracle Fusion as a department.
Business units (for sharing reference data sets among organizations) are uploaded from the source application when you perform the task Load HCM Data for Coexistence to load work structures records. There is a one-to-one correspondence between business groups in E-Business Suite HRMS and business units: you identify a business unit for each business group during the data-mapping phase prior to uploading data to Oracle Fusion.
Note
If you use another Oracle Fusion product that shares business units with HCM coexistence, then the business unit may be updated outside the context of HCM coexistence. You must coordinate such updates and ensure that any changes are applied also in the source application to avoid conflict.
Legislative data groups are a means of partitioning payroll and related data. At least one legislative data group is required for each country where the enterprise operates. Each legislative data group is associated with one or more payroll statutory units.
Oracle Fusion Payroll is organized by legislative data groups. Each legislative data group marks a legislation in which payroll is processed, and is associated with a legislative code, currency and its own cost key flexfield structure. A legislative data group is a boundary that can share the same set up and still comply with the local laws. It can span many jurisdictions as long as they are within one country, and contain many legal entities that act as payroll statutory units. Each payroll statutory unit can belong to only one legislative data group.
A legal entity is a recognized party with rights and responsibilities given by legislation.
Legal entities have the right to own property, the right to trade, the responsibility to repay debt, and the responsibility to account for themselves to regulators, taxation authorities, and owners according to rules specified in the relevant legislation. Their rights and responsibilities may be enforced through the judicial system. Define a legal entity for each registered company or other entity recognized in law for which you want to record assets, liabilities, expenses and income, pay transaction taxes, or perform intercompany trading.
A legal entity has responsibility for elements of your enterprise for the following reasons:
Facilitating local compliance
Taking advantage of lower corporation taxation in some jurisdictions
Preparing for acquisitions or disposals of parts of the enterprise
Isolating one area of the business from risks in another area. For example, your enterprise develops property and also leases properties. You could operate the property development business as a separate legal entity to limit risk to your leasing business.
In configuring your enterprise structure in Oracle Fusion Applications, you need to understand that the contracting party on any transaction is always the legal entity. Individual legal entities own the assets of the enterprise, record sales and pay taxes on those sales, make purchases and incur expenses, and perform other transactions.
Legal entities must comply with the regulations of jurisdictions, in which they register. Europe now allows for companies to register in one member country and do business in all member countries, and the US allows for companies to register in one state and do business in all states. To support local reporting requirements, legal reporting units are created and registered.
You are required to publish specific and periodic disclosures of your legal entities' operations based on different jurisdictions' requirements. Certain annual or more frequent accounting reports are referred to as statutory or external reporting. These reports must be filed with specified national and regulatory authorities. For example, in the United States (US), your publicly owned entities (corporations) are required to file quarterly and annual reports, as well as other periodic reports, with the Securities and Exchange Commission (SEC), who enforces statutory reporting requirements for public corporations.
Individual entities privately held or held by public companies do not have to file separately. In other countries, your individual entities do have to file in their own name, as well as at the public group level. Disclosure requirements are diverse. For example, your local entities may have to file locally to comply with local regulations in a local currency, as well as being included in your enterprise's reporting requirements in different currency.
A legal entity can represent all or part of your enterprise's management framework. For example, if you operate in a large country such as the United Kingdom or Germany, you might incorporate each division in the country as a separate legal entity. In a smaller country, for example Austria, you might use a single legal entity to host all of your business operations across divisions.
When you set up legal entities, you can identify them as legal employers and payroll statutory units, which makes them available for use in Oracle Fusion Human Capital Management (HCM). A tax reporting unit is created automatically when you add a legal entity and identify it as a payroll statutory unit. Depending on how your organization is structured, you may have only one legal entity that is also a payroll statutory unit and a legal employer, or you may have multiple legal entities, payroll statutory units, and legal employers.
Payroll statutory units enable you to group legal employers so that you can perform statutory calculations at a higher level, such as for court orders or for United Kingdom (UK) statutory sick pay. In some cases, a legal employer is also a payroll statutory unit. However, your organization may have several legal employers under one payroll statutory unit. A legal employer can belong to only one payroll statutory unit.
Payroll statutory units and tax reporting units have a parent-child relationship, with the payroll statutory unit being the parent.
Tax reporting units are indirectly associated with a legal employer through the payroll statutory unit. One or more tax reporting units can be used by a single legal employer, and a tax reporting unit can be used by one or more legal employers. For example, assume that a single tax reporting unit is linked to a payroll statutory unit. Assume also that two legal employers are associated with this payroll statutory unit. In this example, both legal employers are associated with the single tax reporting unit.
A legal employer is a legal entity that employs workers. You define a legal entity as a legal employer in the Oracle Fusion Legal Entity Configurator.
The legal employer is captured at the work relationship level, and all employment terms and assignments within that relationship are automatically with that legal employer. Legal employer information for worker assignments is also used for reporting purposes.
Payroll statutory units are legal entities that are responsible for paying workers, including the payment of payroll tax and social insurance. A payroll statutory unit can pay and report on payroll tax and social insurance on behalf of one or many legal entities, depending on the structure of your enterprise. For example, if you are a multinational, multicompany enterprise, then you register a payroll statutory unit in each country where you employ and pay people. You can optionally register a consolidated payroll statutory unit to pay and report on workers across multiple legal employers within the same country. You associate a legislative data group with a payroll statutory unit to provide the correct payroll information for workers.
Use a tax reporting unit to group workers for the purpose of tax and social insurance reporting. A tax reporting unit is the Oracle Fusion Human Capital Management (HCM) version of the legal reporting unit in Oracle Fusion Applications. To create a tax reporting unit, you use the Oracle Fusion Legal Entity Configurator to define a legal entity as a payroll statutory unit. When you identify a legal entity as a payroll statutory unit, the application transfers the legal reporting units that are associated with that legal entity to Oracle Fusion HCM as tax reporting units. You can then access the tax reporting unit using the Manage TRU - HCM Information task.
If you identify a legal entity as a legal employer only, and not as a payroll statutory unit, you must enter a parent payroll statutory unit. The resulting legal reporting units are transferred to Oracle Fusion HCM as tax reporting units, but as children of the parent payroll statutory unit that you entered, and not the legal entity that you identified as a legal employer.
