Define Earnings Elements for the US

You define earnings elements using the Elements task. Like any standard element, you must create eligibility criteria for them.

Here are some things to consider before you define them.

• What options you select in the element template

• Does this element apply to time card eligible employees

• Should the payroll process perform gross-up for the earnings

• Is this an overtime earnings element

• What indirect elements are generated for this earning

• How will the payroll process tax these earnings

For further info, see Examples of Creating Earnings Elements for the US in the Help Center.

Select Earnings Options in the Element Template

The Elements task provides questions for creating earnings. Here are some things to consider when defining these elements.

• Setting the involuntary deductions eligibility

• Selecting a rate calculation rule

• Selecting a rate conversion rule

• Setting retroactive pay eligibility

• Using absence entitlements to reduce regular earnings

• Identifying the date earned

How You Set Involuntary Deductions Eligibility

When creating earnings elements, the element template provides an option for choosing how to process and pay the element. For earnings elements, this setting affects how the process calculates involuntary deductions.

For this template setting	The process does this for the earnings	And this for the involuntary deduction
Process and pay with other earnings	Calculates the earnings in the regular run. In this case, the process uses regular tax rates.	Deducts the involuntary deduction order or the calculated amount and applicable fees from the regular process run.
Process separately, but pay with other earnings	Calculates and taxes the earnings through a separate payroll action, but it's paid with the other earnings. They appear as single entries in the Statement of Earnings and payslip. In this case, the payroll process uses supplemental tax rates. For supplemental runs, earnings are always taxed at the supplemental rate. Use this setting for earnings that require special tax rules, such as bonuses.	Deducts the order amount from the regular process only. It's not deducted again from the process separate run unless the order amount hasn't been fully satisfied in the regular run. The exception to this is for order amount overrides entered as a rate. For these cases, the amount is deducted from both the regular and process separate runs. Any applicable fees are deducted from the regular process only.
Process separately and pay separately	Each earning is processed in a separate payroll action. They are paid separately from other earnings and appear as separate Statement of Earnings and payslip entries. In this case, the payroll process uses supplemental tax rates. For supplemental runs, earnings are always taxed at the supplemental rate.	Not recommended for earnings that are subject to involuntary deductions.

How to Select a Rate Calculation Rule

During earnings element definition, you can choose from one of these calculation rules.

• Factor

• Flat Amount

• Hours * Rate

  The payroll process uses one of these methods to derive the rate.

  • Employee's salary basis

  • Through element entry

  Note: To ensure proper overtime calculation, the Standard Earnings of Premium secondary classification must use the Hours * Rate rule.

• Percentage of Earnings

How to Select a Rate Conversion Rule

You can select specific formula rules when you create an element to manage rate conversions. Conversion rules apply to earnings classification elements, including standard, supplemental, absence, and time elements.

You can set conversion rules for the following element attributes.

Element attribute	You can select a rate conversion rule
Periodicity	When you use the flat amount or hours * rate calculation rule.
Proration	When you make the element subject to proration.
Work Unit	When you select hourly work units for a standard or supplemental earnings element.

For further info, see Rate Conversion Rules for the US in the Help Center.

How to Set Retroactive Pay Eligibility

Retroactive pay is compensation you issue to a person in the current pay period because of an adjustment you had to make for a previous period. Because of this, you need to perform a recalculation using the Recalculate Payroll for Retroactive Changes process.

Here's what happens when you run this process.

1. It determines which payroll runs are effected.

2. It recalculates them to find the changes.

3. It brings those changes into the current period.

During earnings element definition, the template includes a question that identifies retroactive pay processing eligibility for the element. If you enable retroactive processing, the template:

• Associates the retroactive pay event with the element

• Generates the appropriate indirect elements

  For further info, see Indirect Elements for the US in the Help Center.

How to Use Absence Entitlements to Reduce Regular Earnings

When defining an Absence element, the element template provides a question on whether or not the element should reduce regular earnings. By selecting Yes, you can reduce the regular earnings with the absence entitlement calculation.

This setting reduces only earnings and hours for elements attached to a salaried salary basis where no time cards are used.

Example of Reducing Regular

A salaried employee reports 16 hours of vacation time-off this pay period. You pay them on a biweekly schedule.

This is what the employee's Statement of Earnings would look like if regular earnings are reduced. The sum of hours worked and not worked equals the regular hours.

Earnings Type	Hours	Amount
Regular Salary	64	6400 USD
Vacation Pay	16	1600 USD

However, this is what the employee's Statement of Earnings would look like if the regular earnings weren't reduced.

Earnings Type	Hours	Amount
Regular Salary	80	8000 USD
Vacation Pay	16	1600 USD

How to Identify the Date Earned

The Elements task provides the Date Earned input value for all nonrecurring element entries, such as for overtime earnings elements. Use this input value to capture the date the earnings were earned. When provided, the payroll process doesn't use proration and allocation.

If you don't provide a Date Earned, the payroll process distributes the entry across all applicable overtime periods within the pay period. If there are multiple overtime periods within the payroll period, the US proration formula ensures the results are allocated against the overtime period that spans the date earned.

Configure the Element for Time Card Employees

If you want to use this element with employees reporting their hours through time cards:

1. Define the earnings element using the Time Card category.

2. To use the element for tagging purposes, run the Oracle Fusion Time & Labor Generate Data Dictionary Time Attributes process.

3. If you allocate time entry hours to different work jurisdictions, set up your time card layout to allow for these entries.

For further info, see Time Cards for the US in the Help Center.

Enable Net-to-Gross Processing for This Element

You can perform net-to-gross processing of earnings elements. The payroll process calculates the gross amount required to meet the net pay. You select which taxes and other deductions you're willing to pay by selecting the balances used during net-to-gross processing.

When defining earnings of standard or supplemental types, the template provides a question that enables net-to-gross processing.

Federal, state, and local levels of taxes are available for inclusion or exclusion.

For further info, see How the Payroll Process Calculates Net-to-Gross Earnings for the US in the Help Center.

Define Overtime Earnings

The earnings of nonexempt employees are subject to overtime calculations. There are some things you should consider before you define the earnings element.

• Naming the element

• Calculating earnings for nonexempt employees

• Configuring the element for overtime calculations

• Choosing a premium calculation rate rule

• Allocating earnings

• Calculating overtime for time card employees

For further info, see Human Resources Cloud Implementing Payroll Overtime Rates for the United States on the Help Center.

What Are the Special Rules for the Element Name

When creating an overtime earnings element, don't use Overtime as part of the element or reporting name. Overtime is a reserved term, and including it in user-defined elements would interfere with balance initializations.

How Nonexempt Employees Affect Earnings Calculations

The payroll process determines if an employee is eligible for overtime according to the exempt or nonexempt status of the person's job. You set a job's status with Status in the United States Job Information section of the Job task. For further info, see Human Resources Cloud Implementing Payroll Overtime Rates for the United States on the Help Center.

When you set a job as nonexempt, it changes how the payroll process calculates Standard Earnings elements of the Premium secondary classification. The process includes the employee's assignment Overtime Period in its calculations. It doesn't affect the payroll calculations of elements with Overtime secondary classification.

How to Configure the Element for Overtime Calculations

Your selections during earnings element definition determine its eligibility for overtime calculations.

This template prompt	Does this
Should this element be included in the earnings calculation of the overtime base rate?	Determines how the payroll process calculates the overtime base rate. Selecting Yes creates a balance feed to the Overtime Earnings predefined balance.
Should this element be included in the hours calculation of the overtime base rate?	Hours worked represents the total number of hours an employee worked during a pay period. Selecting Yes creates a balance feed to the Overtime Hours predefined balance.

How to Select the Premium Calculation Rate Rule

When defining Standard earning elements of Premium secondary classification, you must specify an Overtime calculation rate rule.

Calculation rate rule	What it does
Blended Rate	Bases the rate on the calculation of the employee's gross hourly rate. Determined by dividing the Overtime earnings by Overtime hours.
Higher of Blended or Normal Rate	Uses either the blended rate or the normal rate, whichever is higher. The normal rate is defined either on the salary basis or through element entry input values.

The blended rate differs from regular rate only when the employee is paid with supplemental earnings, such as bonus or commission.

How the Payroll Process Allocates Earnings

Allocation is the process of attributing income to the overtime period during which it was earned, even if the payroll run spans multiple overtime periods.

For example, a payroll run includes two overtime periods: January 01 to 07 and January 08 to 14. The Date Earned for the element entry is January 08. Therefore, the payroll process creates no results for January 01 through 07, and instead, it allocates the overtime earnings to January 08 through 14.

If you don't specify an Earned Date, then the payroll process allocates the total overtime amount between the overtime periods.

The process determines the number of allocated Overtime Periods for the assignment and pay period based on the calendar days. Then it allocates the earnings accordingly. A pay period can have several contributing overtime periods with a length of any number of days.

How the Payroll Process Calculates Overtime for Time Card Employees

You identify employees that must submit a time card through the Time Card Required check box. This check box is available on the Payroll Relationship and New Hire tasks.

This includes hourly paid and nonexempt workers.

When selected, and you have attached the earnings element to a salary basis, the payroll process doesn't process the salary element. Instead, the employee is paid through nonrecurring time card entries. The payroll process derives the worker's hours from your time reporting application, such as Oracle Fusion Time and Labor or a third-party interface.

If you didn't select the check box, the payroll run processes the salary element.

Generate the Indirect Elements for Earnings

During the creation of your elements, depending on the options you selected, the element template may automatically create related indirect elements. For further info, see Indirect Elements for the US in the Help Center.

Calculate Taxes for This Earning

How you configure your earnings can impact how the payroll process calculates the taxes. Here's some things to consider before you define your earnings elements.

• Setting tax annualization

• Distributing earnings across work locations

• Understanding regular and supplemental payroll run

How You Set Tax Annualization

When you define a Standard Earnings element, you can configure it to:

• Process separately but pay with other earnings

• Process separately and pay separately

If you select Yes for one of these options, the template asks if you want to tax the earning across multiple pay periods. If you agree, the template applies a Taxation Pay Periods input value to the element. This value sets the annualization calculation factor.

Note: The Taxation Pay Periods input value isn't available for existing elements. If you want to implement tax annualization for a standard earnings, you must create an element with the option enabled.

You use the Taxation Pay Periods input value to set the number of pay periods for the earnings' tax annualization.

Example of Tax Annualization

Here's how different values can impact federal income tax (FIT) calculations for a semimonthly pay period, assuming the employee is claiming Single / Zero and using 2018 withholding tables.

Taxation Pay Periods value	For this annualized pay amount	Performs this calculation	This is the tax withheld
Blank (pay periods determined by the payroll calendar)	$2,500 semimonthly earnings * 24 pay periods = $60,000	60,000 - 42,400 = $17,600 17,600 * 22 percent = $3,872 3,872 + 4,453.50 = $8,325.50 8,325.50 / 24 = $346.90	$346.90
9	$2,500 semimonthly earnings * 9 pay periods = $22,500	22,500 - 13,225 = $9,275 9,275 * 12 percent = $1,113 1,113 + 952.50 = $2,065.50 2,065.50 / 9 = $229.50	$229.50
18	$2,500 semimonthly earnings * 18 pay periods = $45,000	45,000 - 42,400 = $2,600 2,600 * 22 percent = $572 572 + 4,453.50 = $5,025.50 5,025.50 / 18 = $279.19	$279.19

How to Distribute Earnings

For employees working in multiple locations, you must ensure the correct amount of work is attributed to the appropriate jurisdictions. This can affect tax calculations.

Here are the methods you can use to distribute earnings.

Distribution method	How you do it
Tagged Earnings	Associate an earning to a specific state, county, or city through element entry.
Employee Earnings Distribution Overrides Card	Use this calculation card to select the individual work locations and the percentage of time worked at each.
Earnings Distribution by Jurisdiction	Earnings at the assignment level require no distribution, as the assignment is associated with a single jurisdiction. This is the default method.

For further info, see Earnings Distributions for the US in the Help Center.

What's the Difference Between Regular and Supplemental Runs

This table describes how regular and supplemental payroll runs calculate federal taxes, based on the default settings.

For this payment type	And this process and pay option	Taxes regular runs this way	Taxes supplemental runs this way
Standard	Process and pay with other earnings	Annualized	N/A
Standard	Process and pay with other earnings	Annualized, Aggregation	N/A
Standard	Process separately but pay with other earnings	Annualized (Standard Earnings) + Tiered Flat Rate (Supplemental Earnings)	N/A
Standard	Process separately and pay separately	Annualized (Standard Earnings) + Tiered Flat Rate (Supplemental Earnings) for two separate pays	N/A
Supplemental	Process and pay with other earnings	Annualized, Aggregation	Tiered Flat Rate
Supplemental	Process separately but pay with other earnings	Annualized (Standard Earnings) + Tiered Flat Rate (Supplemental Earnings)	Tiered Flat Rate
Supplemental	Process separately and pay separately	Tiered Flat Rate	Tiered Flat Rate
Supplemental	Process separately and pay separately	Annualized (Standard Earnings) + Tiered Flat Rate (Supplemental Earnings) for two separate pays	Tiered Flat Rate

For further info, see How Supplemental Earnings Are Calculated in a Regular Run in the US in the Help Center.