Payroll Setup for Costing Accounts

Cost and Priority Accounts

Cost accounts store expenses and employer liabilities and charges and can be defined at various costing levels. You've several options to manage how the cost account is derived using the cost hierarchy.

Priority account takes the highest precedence while building the cost account. Because this ' part of the hierarchy, all segments must be populated. If the percentage split is less than 100 at this level, the remaining percentage is built using the costing hierarchy, as applicable for the costing type defined. For example, if 60% is defined as priority account, the remaining 40% is built using costing hierarchy.

Enable Context for Costing Key Flexfield Segment

Run Feature Upgrade flow pattern with payroll flow Enter Payroll Flow Name for Enable Context for Costing Key Flexfield Segments and feature Enable Context for Costing Key Flexfield Segments to enable contexts on costing key flexfield segments.

Once you enable the context feature for a specific costing segment, write a fast formula to derive the costing segment value.

For example, your costing key flexfield includes two segments for which costing information is defined at the element eligibility level: Object and Natural Account. You've an employer liability element that uses distributed costing. The distribution set includes earnings elements that receive entry level costing overrides, which are entered on a time card.

Because element entry costing information is the highest level of the costing hierarchy, the costing process uses this information to populate the Object and Natural Account costing details for the set members. If you also have a costing distribution requirement for an employer liability element to use element entry overrides for the Object segment from set members but always use element eligibility costing details for the Natural Account segment from employer liability element, enable the context feature for the Natural Account segment. You then define a new input value on your employer liability element to capture the Natural Account costing information. Associate this new input value to the Natural Account segment context using the reference field feature. Define rules to ensure the run result created for this new input value, as part of payroll processing, has the desired Natural Account value. The costing process will now consider this run result value for the Natural Account costing segment for employer liability element.

Note:

You can only create a new costing rule using this process for the new elements, because you can't add a new input value if the existing element is already used.

Update Costing Context Reference

You can implement the costing context solution in the following ways:

Use the element entry and create a run result
Use the Apply default at runtime functionality to create a run result
Create a run result using fast formula

Here's an example that illustrates the setup using the Apply default at runtime feature of an input value to populate a costing segment with a specific value, say 000001:

On the Element Summary Cost Context Earnings Results page, create a new input value with the following values:
- Select the Required option.
- Enter 000001 in the Default field.
- In the Reference field, enter the costing context name.
Check the run result after the payroll is processed. The run result is created with 000001 for the new input value. Because the context reference is associated with the input value, this value is used as the costing result for the associated segment in the Reference field. You'll notice that 000001 is used as the segment value for the selected Cost Context Earnings Result element, whereas it's 000000 for all other elements.

Here's an example that illustrates the setup by writing a fast formula and returning a different natural account based on the business unit. In the following sample fast formulas, the account is returned as 200003 if the business unit is Albany BU and 200004 if the business unit is Redwood BU.

Write or modify the formula as follows.
1. Write a new formula to access the HR business unit name:
```
Formula Name: VV_HR_BU_NAME
Formula Type: Payroll Access to HR
DEFAULT FOR PER_ASG_BUSINESS_UNIT_NAME is 'NO_BUSINESSUNIT'
l_bu_name = PER_ASG_BUSINESS_UNIT_NAME
RETURN l_bu_name
```
2. Write a new formula to derive the HR business unit name of a person and associate the respective natural account segment:
```
Formula Name: VV_HR_BU_COST_ACCOUNT
Formula Type: Oracle Payroll
DEFAULT FOR ASG_HR_ASG_ID is 1
DEFAULT FOR l_emp_bu_name is 'NO_BUSINESSUNIT'
Inputs are l_emp_bu_name (text)
SET_INPUT('HR_ASSIGNMENT_ID', ASG_HR_ASG_ID)
CALL_FORMULA('VV_HR_BU_NAME',
              l_emp_bu_name < 'l_bu_name' DEFAULT 'NO_BUSINESSUNIT')
IF l_emp_bu_name = 'VV Albany BU' THEN (l_cost_account = '200003')
ELSE IF l_emp_bu_name = 'VV Redwood BU' THEN (l_cost_account = '200004')
ELSE (l_cost_account = '000000')
RETURN l_cost_account
```
3. Add the following code in the respective formula to return the value and create the run result. For example, you need to add the following code in the existing earnings results formula code and add the return variable along with the existing return values for earnings elements.
```
CALL_FORMULA('VV_HR_BU_COST_ACCOUNT',
              l_account < 'l_cost_account' DEFAULT '000000')
RETURN l_account
```
4. Modify the status processing rule to create the run result. For example, you need to add a new row in the status processing rule of the earnings results element as a direct result with the above variable and target input value as the new input value.
Create a new input value and associate the costing context name in reference field.
Check the run result after the payroll is processed. The run result is created based on the business unit of the employee for the new input value. Because the context reference is associated with the input value, the above value is used as the costing result for the associated segment in the Reference field. You'll notice that 200003 is used as the segment value to Manager Assignment and 200004 is used as the segment value to Analyst Assignment for VV Cost Context Earnings Result element.

Note:

When you're creating new input value to associate the costing context, you must create the new input value in all the related elements. For example, if you're creating a new input value, say Cost_Account on the XX Base Salary element to associate the costing context, then you must create the new input value on the XX Base Salary Calculator, XX Base Salary Distributor, XX Base Salary Results, XX Base Salary Retroactive, and XX Base Salary Retroactive Results elements with the same input value name Cost_Account. You might ignore the elements that aren't applicable for your localization, such as the Calculator and Distributor elements that won't be created for UK Localization in Earnings.

In the US localization, you need to cost the base retro element (XX Base Salary Retroactive in the above example) instead of the retro results element because the costing context won't be passed to the retroactive results element from retro pay. Otherwise, you need to modify the retroactive formula if you wish to cost the retroactive results element.

Create Overrides

Create overrides by entering cost account numbers at lower levels of the cost hierarchy. This table shows some examples of why you might create overrides.

Type of Overrides	Typical Reasons	Examples
Lower levels of the cost hierarchy	Manage costs at a granular level.	You enter a cost center number for a specific job to override the cost center information at the department level.
Person level	Set up costing for a person at the payroll relationship, assignment level.	You split the salary costs for a worker whose assignment involves working for two departments that belong to different cost centers.

Charge Costs to a Single Priority Account

Use priority accounts to cost elements that require the same account combination. For example, you can use a priority account for an hourly earning element for laboratory work that's charged to a grant fund.

Create a priority account on the Costing of Elements page to charge the entire cost or a part of it to a priority account. If you allocate only a percentage of a cost to a priority account, the remaining percentage is derived using standard costing. When you create a priority account, you must specify a value for each segment.

Allocate a Cost to Several Accounts

Allocate a cost to more than one account by creating several accounts for an object. Specify the percentage to charge to each account. For example, allocate costs to split salary costs for a job shared between two cost centers on the Costing of Jobs page.

This table shows where you set up cost allocations.

Account	Costing Setup Pages
Cost	Costing of Departments Costing of Jobs Costing of Positions Costing of Locations Note: Load costing of locations via HDL. Costing a Person Costing of Payrolls Costing of Payment Sources
Priority	Costing of Elements

Account

Costing Setup Pages

Cost

Costing of Departments

Costing of Jobs

Costing of Positions

Costing of Locations

Note: Load costing of locations via HDL.

Costing a Person

Costing of Payrolls

Costing of Payment Sources

Priority

Costing of Elements

Cost Payroll Relationship Level Elements Using Assignment Attributes

Create costing eligibility rules for payroll relationship level elements based on the assignment details of the employee. This lets you define the offset account for payroll relationship elements based on employee information such as department, job, position, and people group. For example, you can create costing eligibility rules that will have a different offset account for payroll relationship elements, such as Federal Income Tax, to the natural account 90001 for employees in department A and 90002 for employees in department B. In the costing hierarchy, the new offset account is above the regular offset account of element eligibility.

This introduction of a new offset account in the costing hierarchy also requires changes for retroactive distributed elements to consider costing eligibility on assignment attributes of retroactive element.

These costing hierarchy changes are controlled using the process configuration parameter date used to enable element eligibility hierarchy changes. Earliest date used by the costing process to use the hierarchy changes related to costing eligibility on assignment attributes. Format: YYYY/MM/DD. Default value: 2025/06/01. Any costing processes that are submitted on or after the default date use the new costing hierarchy. If you don't want to use this new hierarchy changes from this default date or want to defer it completely, you can set the parameter value to any desired future date, such as 12/31/4712.

Note: This offset account feature is available for payroll relationship level elements only. The costing eligibility is only for payroll relationship level elements.

Distribute a Cost to Elements Included in a Distribution Group

Distribute the cost of an element, such as an employer tax or liability, across a group of elements. This group typically includes earnings elements, but might also include other elements at the payroll relationship level. Create the distribution group on the Object Groups page, and set up the distribution options on the Costing of Elements page.

When you calculate your payroll, the process distributes the cost results for the distributed element across the elements in the group. The distribution is based on the ratio each element contributes to the group's total. The process overrides the account numbers of the segments of the elements in the group with the account numbers defined for the segments of the distributed element.

Offset Accounts

Offset accounts create balancing entries required for double-entry bookkeeping. Set up an offset account on the Costing of Elements page for each element eligibility record that you cost. Defined at the element eligibility level and not a cost hierarchy. If a segment value isn't defined, value from the cost account is used.

This table describes typical payroll expenses and the type of offset accounts to set up.

Element Classification	Type of Accounting	Offset Account
Standard earnings that affect net pay	Cash Accounting	Asset account, such as Cash in Bank
Standard earnings that affect net pay	Accrual Accounting	Payroll liability account, such as Wages Payable
Employer liabilities	Cash and Accrual Accounting	Liability account for specific type of liability, such as Union Dues

Liability, Cash, Cash Clearing Accounts

The number of payment accounts you create depends on whether your company uses cash or accrual accounting, and whether you reconcile your payments. Create accounts for your payment sources using Costing of Payment Sources.

This table lists the accounts you'd typically create for each type of accounting.

Type of Accounting	Type of Accounts
Cash and accrual accounting	Create a cash account for each separate bank account. Specify the appropriate natural account for each record.
Accrual accounting	Create a payroll liability account for each payment source you cost.

If you reconcile your payments, create a cash clearing account to generate costing entries when the payments clear. Typically, you set up cash clearing accounts for payments where there's a delay between the date the payment process issues the payment and the date the bank clears it.

When setting up the accounts, enter the same account information that you use for the General Ledger accounts you use with Cash Management.

Suspense and Default Accounts

Set up suspense and default accounts on the Costing of Payrolls and the Costing of Departments pages. You set up these accounts at the payroll and department levels where department level take precedence over payroll level for this account. When set up at the payroll level, you can override them, if required, with suspense and default accounts at the department level. For example, in a large enterprise you might set up default accounts for departments where the managers commonly review and resolve their department's expenses.

Tip:

As best practice set up a suspense and default account at the payroll level. Otherwise, you must set up a suspense and default account for every department to ensure you charge invalid and un allocated costs to an account.

Use suspense account:

When net earnings from the elements in the distribution group aren't available for the costing process to base allocating distributed costs.
For costing entries when segments don't contain a valid value and the segment is required.

Use default account:

When the total of costs are intended to be split across different key flexfield combinations at a particular level but splits don't sum to 100%. Any remainder goes to the default account.
For costing entries when segments don't contain a valid value and the segment is required.

If you don't specify a value for each segment of the cost account when you set up costing or for the element entry, the resulting calculation is determined by two factors:

Segment of the cost allocation key flexfield is required or optional
Suspense account is defined

If a segment of the cost allocation key flexfield is:

Optional, regardless of whether you define a suspense account, the result displays a blank (null) value in the segment
Required, and the suspense account is defined, the costing result is placed in a suspense account
Required, and the suspense account isn't defined, the calculation displays an error, and the person's results aren't costed