Payroll Setup for Costing Accounts

Set up accounts to cost payroll run, to cost payment results, and to store invalid and unallocated costs. Review the options available for each of these payroll accounts.

Cost and Priority Accounts

Cost accounts store expenses and employer liabilities and charges and can be defined at various costing levels. You have 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 have 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.

Since 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, since you can't add a new input value if the existing element is already used.

Create Overrides

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

Cost Payroll Relationship Level Elements Using Assignment Attributes

Create costing eligibility rules for payroll relationship level elements based on assignment data and allocate the cost of payroll relationship elements based on employee information such as department, job, position, and people group. Payroll Assignment isn't applicable for relationship level element.

For example, create costing eligibility rules that will cost payroll relationship elements, such as Federal Income Tax to the Natural Account 60001 for employees in Department A and 60002 for employees in Department B. Create the regular element eligibility and create the costing information using the costing type of Distributed to use costing eligibility. Then, select Costing Eligibility on Assignment Attributes node and Create Costing by Assignment Attributes action to enable the assignment attributes, such as department, job and position for Payroll Relationship level elements. Now create the different cost codes based on these attributes. The offset information that you created using Distributed Costing is used from regular costing eligibility. 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 may 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 would 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