An Oracle White Paper

October 2013

Oracle Fusion HRMS (US) Payroll

Fair Labor Standards Act Setup

Oracle Fusion US Payroll Fair Labor Standards Act Setup

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Oracle Fusion US Payroll Fair Labor Standards Act Set Up

Table of Contents
FLSA Status....................................................................................... 2
Employee Information ........................................................................ 3
Create an Overtime Period Manage Time Definitions ....................... 5
Associating an Overtime Period to a Payroll ...................................... 10
Override Overtime Period ................................................................ 10
Element Creation ............................................................................. 12
Salary .......................................................................................... 12
Create Salary Basis ...................................................................... 13
Assign Salary Basis to Employee ................................................... 14
Standard Overtime Element ......................................................... 15
Premium Overtime Element ......................................................... 18
Augment Elements ........................................................................... 24

Oracle Fusion US Payroll Fair Labor Standards Act Set Up

This document is intended to guide the user through the configuration steps
necessary for the use of FLSA processing in Oracle Fusion HRMS (US).

FLSA Status
Oracle Fusion HRMS (US) determines Fair Labor Standards Act (FLSA) eligibility
based on the job assigned to the employee. Employers define the job as non-exempt in
the FLSA Status field found in the United States Job Information region (refer to the
screenshot given below). The Oracle Fusion HRMS (US) applies the FLSA Overtime
calculation rules only when the job for the assignment is nonexempt. If a job exists for
the employee, but the FLSA Status is null or if no job is assigned to an employee, the
default status for the FLSA Status is exempt.
The FLSA Status impacts the premium Overtime calculation if the job is defined as
nonexempt. If an employer elects to pay exempt employees overtime, FLSA does NOT
control the rate, and the employer can pay at straight time, time and a half, or double
time. The employer defines what overtime they want to pay. Under the law, no
overtime has to be paid to the exempt employee. In this case, the premium calculation
of overtime is not performed since it is defined by the employer.
For Fusion, the FLSA Status is stored on the United States Job Information region of
Job Details (Navigation ->Workforce Structures ->Jobs ->Manage Jobs).

Oracle Fusion US Payroll Fair Labor Standards Act Set Up

Employee Information
Oracle Fusion HRMS (US) determines Fair Labor Standards Act (FLSA) eligibility
based on the job assigned to the employee.
Employers can assign a job to an employee in two places:

When they hire an employee in the job field under employment information tab.

Oracle Fusion US Payroll Fair Labor Standards Act Set Up

In the Job field under Job Details on the Manage Employment screen.

Oracle Fusion US Payroll Fair Labor Standards Act Set Up

Create an Overtime Period Manage Time Definitions

The employer must define one or more workweeks that they use for satisfying FLSA
overtime calculations. A workweek must be a regularly recurring period of 168 hours
(seven consecutive 24-hour periods). The workweek does not have to be the same as a
calendar week or begin at the start of a day.
Employers may create multiple time definitions to establish different workweeks for
different facilities or groups of employees.
In Fusion, the Manage Time Definition task is used to define an overtime period,
which specifies the period that the application will use for FLSA overtime calculations.
Employers create overtime periods based on their specific business requirements. For
example, if overtime period is a standard 5 day work week, employers would use Static
Period in Time and select weekly for the period. If employers have employees that
work a nonstandard period of time, employers would use Time Spans to first define the
period type. Then define the overtime period and specify the starting date and the
length of time of the period.
Follow this setup for Static time definition:
1. Select Create Time Definition.
2. Select the LDG from the list.
3. Select a definition type of Static Period from the list.
Navigation > Payroll Calculation > Manage Payroll Process Configuration >
Manage Time Definitions

Oracle Fusion US Payroll Fair Labor Standards Act Set Up

4. Enter the name of the time definition.

5. Enter the short name of the time definition.
6. Select the appropriate value in the Period Basis field.
7. Enter the number of years for the overtime period in the Number of Years field.
The application generates overtime periods for the numbers of years as of the
start date.
8. Enter a start date for the overtime period in the First Period Start Date field.
9. Select Element Allocation in the Static Time Period Usages Available region.
10. Click on Next and then Submit to save your work.

Oracle Fusion US Payroll Fair Labor Standards Act Set Up

Follow this setup for Time Span definition:

1. Select Create Time Definition.

2. Select the LDG from the list.
3. Select a definition type of Static Period from the list.
4. Enter the name of the time definition.
5. Enter the short name of the time definition.
6. Select the Quick Create value in the Period Basis field.

Oracle Fusion US Payroll Fair Labor Standards Act Set Up

7. On the Create Period Basis page, provide the required information:

8. Enter the name of the time definition.

9. Enter the short name of the time definition.
10. Select the appropriate value in the Period Type field (Ex: Period type Weekly
with Period Unit = 3 (21 days)). Could also specify Period type Daily with
Period Unit = 21.
11. Enter a period unit for the time span definition in the Period Unit field.
12. Enter the number of years for the overtime period in the Number of Years field.
The application generates overtime periods for the numbers of years as of the
start date.

Oracle Fusion US Payroll Fair Labor Standards Act Set Up

13. Enter a start date for the overtime period in the First Period Start Date field.
14. Select Element Allocation in the Static Time Period Usages Available region.

15. Click on Next and then Click on Generate Time Periods.

16. Click on Submit to save your work.

Oracle Fusion US Payroll Fair Labor Standards Act Set Up

Associating an Overtime Period to a Payroll

Part of payroll definition is associating a default time definition to it. The time
definition specifies the starting date and length of the overtime period used in the
calculation of FLSA.
By doing this a default overtime period is assigned to a payroll for all the workers who
are eligible for overtime. Navigation > Payroll Calculation > Manage Payroll Process
Configuration > Manage Payroll Definitions

Override Overtime Period

Employers have the option of overriding the overtime period at the employee level.
Note: Specifying an overtime value at a lower level will override values at higher
levels. Priority order for overtime is:
1. Payroll Assignment
2. Payroll Term
3. Payroll Relationship
4. Payroll Definition

Navigation: Payroll Calculation > Person > Manage Payroll Relationships

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Oracle Fusion US Payroll Fair Labor Standards Act Set Up

Payroll Assignment Level:

Note: Multiple assignments under same term should not have different overtime
periods at the Payroll Term Level.

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Oracle Fusion US Payroll Fair Labor Standards Act Set Up

Element Creation
The following elements must be setup in the payroll system. Navigation: Payroll
Calculation > Manage Elements

Salary
The user-defined Regular Salary element must be created with a Calculation Rule
of Unit X Rate or Flat amount and processing type Recurring.

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Oracle Fusion US Payroll Fair Labor Standards Act Set Up

Note: New elements feed the seeded balances FLSA Hours and FLSA Earnings when
user select Yes to FLSA Rules given in the below screenshot.

Create Salary Basis

The salary basis allows for the following time periods:
Annually
Hourly
Monthly
Period (use the assignment payroll frequency)
When creating Salary Basis, select hourly for Frequency and attach the Regular Salary
element to a salary basis.

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Oracle Fusion US Payroll Fair Labor Standards Act Set Up

Assign Salary Basis to Employee

Once employers have completed setup for Salary Basis, they can assign it to the
employee. Navigation: Person Management > Manage Salry

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Oracle Fusion US Payroll Fair Labor Standards Act Set Up

Note: When users save this record, an element entry with the specified start and end date
is automatically generated.

Standard Overtime Element

Create the standard Overtime element using a primary classification of Standard
Earnings, and a secondary classification of Overtime.
Navigation: Payroll Calculation > Earnings and Deductions > Manage Elements

Element must be created as non-recurring. In rules wizard, select Yes for question
Can a person have more than one entry of this element in a payroll period?

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Oracle Fusion US Payroll Fair Labor Standards Act Set Up

Create the element eligibility link for this element, and attach it to nonexempt
employees.
For earnings to be associated with a person, employer must create an element entry for
non exempt employees. Periodicity must be set to hourly when element entry is created
for an employee.

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Oracle Fusion US Payroll Fair Labor Standards Act Set Up

If the employee has worked overtime on different days in a payroll period, then create
an element entry for each overtime entry and provide an Earned Date value as given, in
the screenshot below. If an Earned Date is not given, then the total overtime amount is
allocated between the overtime periods.

Note: If a rate is not provided in overtime element entry, then hourly rate from salary
basis will be considered for overtime calculation.
Example:
Regular hours worked : 120
Regular rate
: $10/hr
Overtime Hours
: 30
Overtime
= (Overtime Hours)* (Regular rate) * (Multiple)
= (30) * (10)* (1) = $300

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Oracle Fusion US Payroll Fair Labor Standards Act Set Up

Premium Overtime Element

Create the Premium element using a primary classification of Standard Earnings,
and a secondary classification of Premium.

Element must be created as non-recurring and select Yes for question Can a person
have more than one entry of this element in a payroll period?

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Oracle Fusion US Payroll Fair Labor Standards Act Set Up

Note: An indirect element named OT Premium Adjustment is created automatically

when creating premium element. Create an element eligibility link for this element and
for the base premium element.
Premium Calculation Rate Rule
The Premium Calculation Rate Rule is used by Oracle Fusion HRMS (US) to
determine the calculation of the premium portion of overtime. The premium portion of
overtime is paid at a differential pay rate (being 50% or more) dependent on the
business requirements. This rule must be defined as part of the Premium Overtime
Element setup. The premium rate (or the blended rate) for an employee for the
overtime period is calculated as:
(FLSA Earnings) / (FLSA Hours) * 0.5
The two options for the Premium Calculation Rate Rule are defined as:
Blended Rate
Higher of Blended or Normal Rate

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Oracle Fusion US Payroll Fair Labor Standards Act Set Up

Fusion captures the default Premium Calculation Rate Rule under the Calculation
Defaults, which is at the payroll definition level. The default value is Higher of
Blended or Normal Rate.
Note: If user enters a Rate input value, the calculation noted above does not apply as
the entry of this input value implies an override.
Blended Rate Calculation with Bonus and without Earned Date - Example
An employee earns $10 per hour, works 40 hours, 10 hours overtime, and earns a
bonus of $100 which impacts blended rate.
Straight Time and Straight Time Overtime
= (40 hours * $10/hour) + (10 hours * $10/hour) = $500
Premium Rate
= [( 50 hours worked x $10/hour) + $100 bonus] / 50 hours
= $12/hour * 0.5 = $6/hour
Premium Amount = $6/hour x 10 hours of overtime = $60
Total Amount = $500 (Straight Time and Straight Time Overtime) + $100 (Bonus) +
60 (Premium) = $660
Blended Rate Calculation with Bonus and Earned Date - Example
Regular hours worked : 120
Overtime Hours
: 30
Regular rate
: $10/hour
Bonus
: $1500 on 14-Jan-2010
Pay Period
: semi-monthly (Jan 1 Jan 15)

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Oracle Fusion US Payroll Fair Labor Standards Act Set Up

Element level representation:

Blended Rate Calculation with Bonus:

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Oracle Fusion US Payroll Fair Labor Standards Act Set Up

FLSA Premium Calculation

Premium is nothing but the amount paid to the employee with Blended rate for the
overtime hours worked.
Premium = Overtime Hours * Blended Rate * Multiple
Default Multiple factor for premium amount calculation is 0.5.

*Blended Rate will be used for premium calculation

Blended Rate Calculation for Commission only employee with Bonus and without
Earned Date - Example
Information:
Salary = $0/hour Weekly
Commission = $2000
Bonus = $400
40 hours per pay period
No date earned
Only one Assignment
Pay Period = Weekly (Jan 1 Jan 7)
Overtime Period = Sunday to Saturday (1 week)

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Oracle Fusion US Payroll Fair Labor Standards Act Set Up

8 Overtime hours

Result for Pay Period:

Wages (Commission + Bonus): $2400
FLSA Premium Rate: $2400/48 = $50
Premium Overtime: 8*$50 *0.5 = $200
FLSA Premium Adjustment Element
The FLSA Premium Adjustment Element is required in Fusion.
The FLSA Premium Adjustment element creates this adjustment for the premium
portion of overtime for the entire overtime period. Further, a proration event is
automatically attached to this element. Oracle Fusion HRMS (US) creates a
Commission Premium Adjustment element for Non-recurring elements defined using
the Premium calculation rule.
Note: Element entry is created automatically for the adjustment element if there is any
overlap in overtime irrespective whether adjustment for overtime premium is available
or not. We need to create eligibility link for this element manually. If eligibility link is
not created then system will not allow creating element entry for the base element
(Premium earning element).

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Oracle Fusion US Payroll Fair Labor Standards Act Set Up

Flow Diagram

Augment Elements
Augments are used to refer to amounts paid that are in addition to the employee's
regular rate of pay and that are considered non-discretionary, such as a commission
or bonus.
The FLSA functionality prorates the augment amounts across all periods during
which they were earned. For example, employer pays employee commissions
monthly and pays the salary semi-monthly. The commission is evenly divided over
the pay periods during the period it was earned with 50% allocated to each semimonthly pay period.
The following steps show how to create an augment element:

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Oracle Fusion US Payroll Fair Labor Standards Act Set Up

Create the Augment element using a primary classification of Supplemental

Earnings, and the appropriate secondary classification.

Processing Type for Augment element must be nonrecurring. The Augment

question Prorate this earning across all periods during which it is was earned and
consider it for FLSA calculations, such as for commissions, bonuses, incentives,
and other nondiscretionary earnings? is available only for nonrecurring
supplemental earning elements.

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Oracle Fusion US Payroll Fair Labor Standards Act Set Up

If the augment question value is Yes, then the following processing rules are
automatically set:
1. Calculation rule will be defaulted to Flat Amount.
2. An indirect element named Commission Premium Adjustment is created
when the augment element is defined.
3. Two new input values Earned Start Date and Earned End Date are created.

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Oracle Fusion US Payroll Fair Labor Standards Act Set Up

Create an eligibility link for Commission Premium Adjustment and for the base
supplemental element.
Create Element Entry
For earnings to be associated with a person, employer must create an element entry for
the eligible employees and base augment element (Commission).

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Oracle Fusion US Payroll Fair Labor Standards Act Set Up

The Earned End Date element entry value must be always less than the base augment
element entrys effective start date.

Note: Once the base augment element entry is created, Oracle Fusion creates one more
element entry for Commission Premium Adjustment with an effective start date as
base augments earned start date element entry value and effective end date as base
augments earned end date element entry value as given in the below screenshot.

User must run the retropay process for the payroll period in which the base augment
element was created. The retropay process picks the Commission Premium
Adjustment element and creates retropay entries for the adjusted premium amount.

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Oracle Fusion US Payroll Fair Labor

Copyright 2012, Oracle and/or its affiliates. All rights reserved. This document is provided for information purposes only and the

Standards Act Setup

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October 2013

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