How to Define HCM Enterprise Structures
Before you can hire a worker or run any country-specific process, you must ensure that the organization structures required for the management of HR processes are set up. You can perform all setup tasks in Setup and Maintenance.
Use the setup tasks to define legal entities, legal authorities, and legal addresses. To ensure that statutory reports are processed properly, consider these key points as you design and create enterprise structures.
A typical enterprise structure setup includes these tasks:
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Define Legislative Data Group
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Define Legal Authorities
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Define Legal Jurisdictions
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Define Legal Entities
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Define Legal Entity Registrations
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Define Legal Reporting Units
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Designate Legal Reporting Units as Tax Reporting Units
Legislative Data Groups
A legislative data group (LDG) defines the payroll and related data partition context for a user. You must create at least one LDG for each country where an enterprise operates.
Use the Legislative Data Groups task to create an LDG. Set the Country to United Kingdom and the Currency to Pound Sterling. Select a Cost Allocation Structure appropriate for your implementation.
Legal Authorities
Legal authorities are the government entities with which an enterprise interacts, for example to send legal reports. There are no predefined legal authorities. You must create a legal authority for each government entity, such as a local tax office, that has a relationship with the enterprise. When you create legal entities, you associate them with legal authorities through legal entity registrations. Use the Legal Authorities task in the Setup and Maintenance work area to create legal authorities and perform these activities:
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Select the Tax Authority Type based on the type of interaction you have with this authority. Typically, this is set to Collecting and Reporting.
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Add one or more legal addresses. Legal addresses must have been previously defined.
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Add one or more legislative categories, such as the predefined HMRC category. The legislative category establishes a link between the legal authority and all jurisdictions associated with that legislative category.
Legal Jurisdictions
All legal entities must be registered against a jurisdiction that's governed by a legal authority.
An identifying jurisdiction is the one that's automatically associated with all legal entities created for the territory. It represents the jurisdiction that a company has to register with when first created, such as Chamber of Commerce or Companies House. Registration information for the identifying jurisdiction is mandatory when you create legal employers. A predefined jurisdiction called United Kingdom HMRC is provided for your use when registering legal entities. By default, it isn't set up as the identifying jurisdiction, so you must do one of these during implementation:
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Edit the United Kingdom HMRC jurisdiction (Legal Jurisdictions task), and set the Identifying option to Yes. This approach is recommended.
Note: Don't modify the values in the Registration Code Assignment section. -
Create a new identifying jurisdiction. If you take this approach, you will need to manually register tax reporting units with the United Kingdom HMRC.
Legal Entities
A legal entity is an entity unequivocally identified and given rights and responsibilities under Commercial Law, through registration with the territory's appropriate authority. Legal entities consist of:
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Payroll statutory unit (PSU). A legal entity that's responsible for paying workers, including the payment of payroll tax and social insurance. PSUs provide a way to group legal employers so that certain statutory calculations, such as court orders and some taxes, can be performed at a higher level.
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Legal employer. A legal entity that employs workers. A legal employer can belong to only one PSU. If multiple legal employers need to be grouped together for tax reporting purposes, you can associate them all with a single PSU. If legal employers don't report together, they must not share a PSU.
There are no predefined legal entities. Use the Legal Entities task to create legal entities.
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You can designate a legal entity as both a legal employer and a PSU. However, if your organization structure changes and you want to add a new legal employer under that legal entity, then the new legal employer becomes a child of both the parent PSU and the first legal employer. Therefore, it's usually better to split PSUs from legal employers to avoid this situation.
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If a legal entity isn't designated as a PSU, you can select an existing PSU to which it belongs.
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The type of registration information required is based on the Registration Code Assignment information defined for the identifying jurisdiction. For example, if you select the predefined United Kingdom HMRC jurisdiction, then you must provide the Legal Entity Registration Number and Employer PAYE Reference for the registration.
Legal Entity Registrations
Legal entities are connected to legal authorities through legal entity registrations. A registration is automatically created for the identifying jurisdiction you select when you create a legal entity. If the legal entity is registered with the United Kingdom HMRC jurisdiction, it can interact with income tax and social insurance legal authorities. If the legal entity will interact with other legal authorities, you must create additional registrations as appropriate.
Use the Legal Entities Registration task from the Setup and Maintenance work area to create registrations.
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When you select a jurisdiction, the Territory field is populated automatically.
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The Issuing Legal Authority field displays a list of all legal authorities associated with the selected jurisdiction.
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The Registered Address field displays a list of all predefined legal addresses.
Legal Reporting Units and Tax Reporting Units
A legal reporting unit (LRU) is the lowest level component of a legal structure that requires registrations. It's used to group workers for the purpose of tax and social insurance reporting or to represent a part of your enterprise with a specific statutory or tax reporting obligation. A LRU is created automatically when you create a PSU. If an LRU is used in Oracle Fusion Payroll for tax reporting purposes, then it must be designated as a tax reporting unit (TRU) using the Legal Reporting Unit HCM Information task. Use the Legal Reporting Units task from the Setup and Maintenance work area to create an additional LRU..