Define Legal Entities for India

When you set up Legal Entities, you can identify them as Legal Employers and Payroll Statutory Units, which makes them available for use in HCM.

Depending on how your organization is structured, you may have a single legal entity that is both a legal employer and a payroll statutory unit, or you may have multiple legal entities, legal employers and payroll statutory units.

Payroll Statutory Units enable you to group legal employers so that you can perform statutory calculations, such as individual income tax calculations, at a higher level. For example, if multiple legal employers belong to the same payroll statutory unit and an employee receives income from more than one employer within a month, you can calculate the person’s individual income tax on the aggregated income. Alternatively, if each of the legal employers belongs to a separate payroll statutory unit, then the person’s individual income tax is calculated separately for each employer.

Note: For India, you don't need to group multiple legal employers under one payroll statutory unit for calculating the aggregate income tax across the legal employers.

Define Legal Entity

Use the following steps to define a Legal Entity in HCM:

Select Manage Legal Entity in the implementation project task list.
Click Go to Task. The Select Scope window appears.
On the Select Scope window, select Create New in the Legal Entity field. Click Apply and Go to Task.
Enter the following details:
1. Select India as the Country.
2. Enter the name of the Legal Entity.
3. Enter a unique number to identify the Legal Entity in the Legal Entity Identifier field.
4. Enter start and end dates.
5. Note: In India, each Legal Entity is also a Payroll Statutory Unit. You need to make sure that the Payroll Statutory Unit check box is selected for each legal entity you define for India.The Payroll Statutory Unit field is enabled only if the legal entity is not a Payroll Statutory Unit (Payroll Statutory Unit check box is not selected). As each legal entity is also a payroll statutory unit in India (Payroll Statutory Unit check box is selected), there is no need to select the payroll statutory unit from the list of values.
6. Select the Legal Employer check box if the Legal Entity employs people.
7. The Identifying Jurisdiction is automatically displayed. The India Company Law is a predefined Identifying Jurisdiction for India.
8. Select the Legal Address that was previously defined.
9. Optionally, enter the Place of Registration.
10. Enter the Permanent Account Number.
11. Enter the Legal Reporting Unit Registration Number.
Click Save and Close to save your work.

Note: What constitutes a legal employer varies from country to country, but this must not be confused with a tax reporting unit, which is primarily used to report tax information. A legal employer is the organization to which the contractual agreement exists with the person.In most cases, a legal employer is also a payroll statutory unit, but a payroll statutory unit can represent multiple legal employers. In HCM Cloud Application, the payroll statutory unit is stored on the Payroll Payment Relationship.A legal entity is also a legal reporting unit unless there is a specific reporting requirement with registrations, which are not same as that of legal entity.