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 might have a single legal entity that's both a legal employer and a payroll statutory unit, or you might 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. Or, 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, if there are multiple legal employers that share the tax account number (TAN), its recommended to have these legal employers within a single PSU rather than in separate PSUs. Also, if the payroll processing is centrally done for all the legal employers, its recommended to group the legal employers in a single PSU. For every PSU in India Payroll, a separate payroll relationship is created.

Define Legal Entity

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

1. Select Manage Legal Entity in the implementation project task list.

2. Click Go to Task. The Select Scope window appears.

3. On the Select Scope window, select Create New in the Legal Entity field. Click Apply and Go to Task.

4. 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 the start and end dates.

   5. Select the Legal Employer and the Payroll Statutory Unit checkboxes based on one of the organization models given here:

      1. If there's a one to one mapping between the legal employer and PSU, select both the Payroll Statutory Unit and Legal Employer checkboxes, if the Legal Entity employs people.

      2. If there are multiple legal employers within a single PSU that have the same Tax Account Numbers (TAN):

         • Select one legal employer as a PSU by selecting both the Payroll Statutory Unit and Legal Employer checkboxes.

         • For all the subsequent legal employers, you need to select only the Legal employer checkbox and select the PSU which you just created from the dropdown list. You need not select the Payroll Statutory Unit checkbox.

      3. If there are multiple legal employers that have different tax account numbers, you need to create separate PSUs for each entity.

         • Select both the Payroll Statutory unit and Legal Employer checkboxes.

      4. If there are multiple legal employers that have the same TAN, multiple PSUs, and you need to perform payroll processing centrally, all the PSUs need to be merged to a single PSU. For this scenario, you need to log an SR or contact Oracle Support for merging the PSUs.

   6. The Identifying Jurisdiction is automatically displayed. The India Company Law is a predefined Identifying Jurisdiction for India.

   7. Select the Legal Address that defined earlier.

   8. Optionally, enter the Place of Registration.

   9. Enter the Permanent Account Number.

   10. Enter the Legal Reporting Unit Registration Number.

5. 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.Usually, 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's a specific reporting requirement with registrations, which aren't same as that of legal entity.