Set Up Variable Rate Allowance

Follow these steps to set up variable rate allowances.

Create Allowance (Factor) Element

Create a new Factor earnings element for your allowance:

1. Using the Elements task, click Create to create a new Regular Earnings element (standard category).
2. Select Factor as the calculation rule for the element.
3. In the Special Rules section, select the user-defined allowance proration event group and the default Entry Changes for Retro event group.
4. Review the element details and enter further information in the UK Element Information region, including the element type (allowance). You must select Allowance in the Element Type field. Otherwise, the allowance is not identifiable as liable for reporting.

Create Rate Definition (Factor Allowance Element)

Create a new rate definition for the factor allowance element:

1. Using the Rate Definition task, create a new rate definition for the factor element you created previously.
2. Enter the details as shown:

   FIELD	VALUE
   Category	Element
   Storage Type	Factor
   Element Name	Factor allowance element you created previously

3. You must uncheck the Calculate Live Rates field.
4. Click Create to create a new contributor type and select Rate Definition as the contributor type.
5. Select the previously created salary basis rate definition as the rate contributor in the Rate Name field.

The Rate Definition contributor type is created as follows:

Create Calculation Value Definition

Create a new calculation value definition for the factor allowance element:

1. Using the Calculation Values Definition task, create a new calculation value definition.
2. Enter the details as shown:

   FIELD	VALUE
   Name	Factor allowance element created previously
   Calculation Type	Rate definition
   New Value Definition Group	User-defined group for factor allowances

3. Select Date Earned in the Retrieval Date field.
4. In the Calculation Values region, enter a range of values in the From Value and To Value columns and select the Factor rate definition created previously to link it to the calculation value definition.

Create Calculation Factor

Create a calculation factor for the factor allowance element and link it to the calculation value definition created previously:

1. Using the Elements task, search for the factor allowance element.
2. Select Calculation Factors and click Create to create a new calculation factor.
3. Enter the details as shown:

   FIELD	VALUE
   Calculation Step	Rate Amount
   Calculation Value Definition	User-defined value definition created previously.

Create a Factor Allowance Element Formula

Create a new earnings formula for the factor allowance element:

1. Using the Fast Formulas task, click Create to create a new formula.
2. Enter the details as shown:

   FIELD	VALUE
   Formula Name	User-defined factor allowance element
   Type	Oracle Payroll
   Effective Start Date	Start date of factor allowance element

3. Add the formula text. This is included in the Factor_Element_Formula.txt file.

Create Status Processing Rules

Create a new status processing rule to use the new formula:

1. Using the Elements task, search for and open the allowance factor element.
2. Select Status Processing Rules and click Create to create a new rule.
3. Enter the details as shown:

   FIELD	VALUE
   Formula Name	User-defined earnings formula created previously.
   Result Returned	L_VALUE
   Result Rule	Direct Result
   Target Input Value	Pay Value

Create Element Entries

Once the above setup steps are completed, you can create element entries for employees who are in receipt of this type of allowance:

1. Using the Element Entries task, select the factor allowance element.
2. Enter the allowance percentage rate as a decimal, for example, 0.05 for 5%, in the Factor input value.
3. If the allowance rate changes during the month, update the element entry as of that date with a new rate in the Factor input value.

Next, run the Generate HCM Rates Process prior to running your payroll.