How to Setup Oracle HRMS Payroll Costing in R12.2.8 & Its Concepts.

What is Oracle Costing?

In Oracle Human Resource Module, A cost which is spent against an employee can be tracked by allocate cost codes to the cost centers. It can be tracked at any level from the Organization to the Individual element entries for the assignments.

In this document, it is further explained about what the various levels are it can be tracked & its logics & the process configuration in Oracle HRMS Module R12.

Various Levels of Costing

There are various levels at which costs can be accumulated in Oracle Payroll and combinations

of costs entered at these levels are processed according to hierarchies.

Below are the list of levels,

·         Payroll                                                  Lowest Priority                  The values set in the lowest level

·         Element Link                                                                                      overrides the highest level

·         Organization

·         Assignment

·         Element Entry                                    Highest Priority

Level	Form	Purpose of Entry
Payroll	Payroll	Identifies company or ledger to which all costs from this payroll should go.
Link	Element Link	Identifies a GL account to debit and a balancing account to credit, or for deductions, an account to credit and a balancing account to debit. Other entries can identify any other accounts into which run results of the element should go.
Organization	Organization	Identifies structures such as cost centers against which to charge the payroll costs of employees in the organization.
Assignment	Assignment Costing	Identifies structures such as cost centers and product lines against which to regularly charge payroll costs of this assignment
Element Entry	Element Entries Batch Lines	Identifies structures such as cost centers and product lines against which to charge payroll costs of an employee assignment for a period.

 Different Type of Costing.

Below are the list of different types of costing process in Oracle HRMS.

·         Costed

·         Fixed Costed

·         Distributed Costed.

Costed:

Ø  It means you can split the run result values over more than one set of cost codes. This is done on the Assignment costing screen.

Ø  It Uses the costing hierarchy as mentioned above. All 5 levels are available for costing.

Ø  Allows assignment level costing.

Ø  Allows split costing at the assignment level.

Ø  The sum of the splits must equal 100 percent.

Fixed Costed:

Ø  It works as the same way Costed method works

Ø  It doesn’t use assignment & Organization level costing.

 

·         Payroll                                                  Lowest Priority                  The values set in the lowest level

·         Element Link                                                                                      overrides the highest level

·         Element Entry                                    Highest Priority

Distributes Cost:

Ø  It will be used when you want to distribute overhead costs (such as employer contributions to a pension plan) over other elements

Ø  Distributed costing requires you to create a distribution set of elements. This is done from the Element Set form.

Ø  Using a type of Distribution Set, you include the elements you want to be in the set.  You can then assign the distribution set to an element at link level.

Ø  The element is then costed as a member of the distribution set, so the costing result is divided by the sum of the distribution sets costings and multiplied by the number of members in the set.

 Configuration of Costing in Oracle HRMS

                The below are the list of activity to be performed in order to set up the Costing process.

Ø  Creation of Cost Allocation Key Flex Field

Ø  Creation of Costing Allocation Key Flex Field Segments

Ø  Assignment of Flex field Qualifiers

Ø  Assignment of Costing in Payroll form

Ø  Setup Costing in Hierarchy levels

 Creation of Cost Allocation Key Flex Field

Ø  Flexfield Segments are defined to allow cost codes to be allocated to set areas within the organization.

Ø  Cost Allocation information normally records the details of employee costing associated with payroll results. If you have installed Oracle Payroll, you can accumulate the costs associated with your payroll results and transfer these to your General Ledger system.

Navigation:

Application Developer --> Flexfield --> Key --> Segments.

Go to Query Mode (F11).

Flexfield Title is Cost Allocation Keyflex field.

Creation of Cost Allocation Key Flex Field Segments

·         Flexfield Segments are defined to allow cost codes to be allocated to set areas within the organization.

·         This Segment should be created based upon the Organization Costing methodology. Generally, the Finance or Accounts team will be suggesting this section that how they are maintaining the Costing in their Organization.

Example,

In the below Screenshot, Five Segments have been created to capture their Costing details.

Creation of Cost Allocation Key Flex Field Qualifiers

·         You use Segment Qualifiers to control the level at which costing information can be entered to the system.

·         When defining a payroll, you need only the segment containing the companies or sets of books to which a payroll's labor costs should go.

·         When defining a link for an earnings or deduction element, you may need only the segment containing the list of the costing and balancing GL codes.

·         You are likely need the segment containing the list of cost centers only when defining an organization or employee assignment or making an element entry.

Level	Qualifiers for this Level	Purpose of Entry
Payroll	Payroll	Company code, set of books
Link	Element Link	GL account codes for costing and balancing
Organization	Organization	Cost centers
Assignment	Assignment Costing	Project or product codes, or cost centers that do not map into organizations
Element Entry	Element Entries Batch Lines	Project or product codes (for employees who submit timesheets)

 Segment wise Cost Codes

Segment Name	Cost Code	Description
Company	001	XX Company Name
Department	305	IT / HR . Depends on the department of the employee belongs to
Account	10001	Accounts code Name
Product	30001	Product or Division Code of the Organization
Future	000000	For Future Segment Purpose

 Setting Up Flexfield Qualifiers

                The below screenshots shows how the Qualifiers is set for the above mentioned business criteria.

Company Segment Qualifiers Setup:

                Only the payroll,Element & Balancing Name has been enabled for the Company Segments.

Department Segment Qualifiers Setup:

                Only the Organization & Balancing Name has been enabled for the Department Segments

Accounts Segment Qualifiers Setup:

                Only the Element & Balancing Name has been enabled for the Accounts Segments

Product Segment Qualifiers Setup:

                Only the Element Entry, Assignment & Balancing Name has been enabled for the Product Segments.

Future Segment Qualifiers Setup:

                Only the Payroll & Balancing Name has been enabled for the Future Segments.

Costing Hierarchy

The costing process will determine which level to assign the costed values to using the hierarchy rule.

As mentioned in the Qualifier setup, below is the summary of the Qualifier Setup which is enabled.

S.No	Name	Qualifier
1	Company	Payroll, Balancing, Element
2	Department	Organization, Balancing
3	Account	Element Link, Balancing
4	Product	Element Entry, Assignment, Balancing
5	Future	Payroll, Balancing

 

You will then be able to enter values at the following levels:

A.      At Payroll Form – Company \ Future

 

B.      At Element Entry Form - Product

C.      At Element Link Form – Company \ Account

D.      At Organization Form – Department

E.       At Assignment Form – Product

If you enter a value at all the levels:

A.      Payroll Level – Company (001)

B.      Element Entry Level – Product (30001)

C.      Element Link Level – Company (002) \ Account (10001)

D.      At Organization Form – Department (305)

E.       At Assignment Form – Product (30001)

Ø  The costing will check to validate these combinations against the hierarchy.

Ø  Company is defined at payroll level & Element level, but this would be overridden by the code defined at element entry level. The same is true of Account, it is entered at element link level, but the element entry level would take priority.

Ø  The actual cost combination would be Company (002) \ Department (305) \ Account (10001)        \ Product (30001) \ Future (00000)              

Balancing Account:

Ø  If you are using double entry bookkeeping you should also set up balance segments. 

Ø  This allows the opposite result of the costed value to be captured, in a specific code.

Suspense Account:

Ø  The system allows you to set up a suspense account; this is another set of Flexfield.

Ø  segments defined on the Payroll form. This is used if validation of the costing flexfield fails. If that is the case then the cost amounts will be costed to the suspense account.

 Assigning Cost Allocation keyflexfield to the Business Group:

                The below screenshot refers how we need to assign the Cost Allocation key flexfield against the Business Group.

 Assign Costing Information against Payroll:

Payroll – Each active payroll must have segments setup for Costing and Suspense.

Navigation:

                HR Responsibility --> Payroll --> Description

Assign Costing Information against Element Link:

Ø  All Elements which pay/deduct money must have at least one link created.

Ø  The number of links for each element and their complexity is dependent on how Finance requires the postings in GL.

Ø  Each link has 2 costing flexfields, one for the Debit and one for the Credit entry in GL.

Navigation:

                HR Responsibility --> Total Compensation -->  Basic --> Link.

 

Assign Costing Information against Organization form:

Ø  Each Organization may have a single costing record populated with one or more segments.

Ø  It works mostly where each HR Org can be directly related to a particular GL Cost Centre.

Navigation:

                HR Responsibility --> Work Structures -->  Organization --> Description --> HR Organization --> Costing Information in Others.

 

Assign Costing Information against Assignment form:

Ø  Each Employee Assignment may have multiple costing records populated with one or more segments.

Ø  This is where split % costing’s applied

Navigation:

                HR Responsibility --> People -->  Enter and Maintain --> Assignment --> Others --> Costing

Assign Costing Information against Element Entry Assignment form:

Ø  Each Employee Assignment may have single costing records populated with one or more segments.

Navigation:

                HR Responsibility --> People  --> Enter and Maintain --> Assignment --> Entry Values.

Mapping Cost Allocation to the GL Accounting Flexfield.

There is one final setup step to map the CostAllocation Flexfield segments to the Corresponding segments in the GL Chart of Accounts KFF.

Navigation:

                HR Responsibility --> People --> GL Flexfield Map

 

Processing the Costing in Oracle HRMS.

                Once the above steps are completed, now we can be good to go for processing the Costing process in the system,

In order to run the Costing report , we need to complete the below process of actions,

a.       Quick Pay or Payroll Run

b.       Pre Payment Run

c.       Archive Run

d.       Costing process.

Standard Costing Reports:

a.       The Cost Breakdown Report for Costing Run shows summarized costing totals for a specified costing process.

b.       The Cost Breakdown Report for Date Range shows summarized costing totals for a particular consolidation set or payroll over a specified interval.