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OHAFLSA004 - Maintain overtime adjustment using multiple adjustment rates

OHAFLSA004 - Maintain overtime adjustment using multiple adjustment rates

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In the standard system, the Fair Labor Standard Act (FLSA) adjustment on overtime hours is calculated by the payroll function Regular Rate of Pay(FLSA Overtime Valuation) ( RGRTE).

In the default processing mode, the function RGRTE uses processing class 85of the wage types to calculate a single Regular Rate of Pay(stored in wage type /R00), which represents the hourly rate of pay of the employee in the given week.

Depending on the value assigned to processing class 85 of a wage type, the amount and hours of that wage type are stored in wage type /R00.

The function then re-valuates the wage type amounts (where the processing class value is 3, 4, 5 or 6) using wage type /R00 as the new rate.

By means of this Customizing activity, you activate an alternative processing logic for payroll function RGRTE(function call with parameter FAOH). The function then uses multiple adjustments rates instead of only /R00.

You can configure a set of wage types to be used to calculate an adjustment rate. For example, you can have an adjustment rate considering only regular and overtime payments, while having another one considering only bonus and overtime payments.

Note
For Concurrent Employment (CE), only the standard (default) processing is supported.
Note
All the wage types that have the rate/amount updated will also have the rate currency changed. Since the calculation is done based on the amount currency (AMT_CURR), RGRTE will update the rate currency (RTE_CURR) with the same currency. Note that if the amount currency is not set, system will use the rate currency for the calculation.

An employee in a given week:

  • Works 40 regular hours (Wage Type "/WRK")
  • Works 3 overtime hours (Wage Type "/OVR")
  • Earns a salary of USD 1000.00 (Wage Type "/SLR")

*Note that these are fictional wage types used to exemplify the calculation. You may have your own wage types configured, according to your business requirements.

Consider the following Adj. ID configuration in view V_T596J_US_FAOH:

Wage Type,,Wage Type Participation on Adjustment Rate,,

  • /R00,,Output Only (Does Not Contribute),,

  • /SLR,,Contributes with Amount,,

  • /WRK,,Determined by Processing Class 85,,

  • /OVR,,Reevaluation Only (Does Not Contribute),,

Consider the following wage type “/WRK” configuration in view V_512W_D:

Wage Type,,Processing Class 85 Option,,

  • /WRK,,1 – Contributes to RR with number and amount, not valuated with RR,,

Consider the following wage type “/OVR” configuration in view V_512W_B:

Wage Type,,Valuation basis,,% Rate,,

  • /OVR,,01,,150.00,,

Considering the configuration above, in payroll, the RGRTE FAOH function was calculated as follows:

  • Regular rate of pay = USD 1000.00 / 40h
  • Regular rate of pay = 25
  • Total overtime pay = 3h * 1.5 * 25
  • Total overtime pay = USD 112.50
  • /OVR = USD 112.50

The overtime calculated was USD 112.50.

If your company wants the payroll function RGRTE to produce multiple adjustment rates follow the following steps:

Step 1

Activate the Subapplication FAOH(FLSA adjustment of overtime hours) and enter the start and end datesfor which you want the new processing to take effect. The system considers the payment date of the payroll period to check this setting.

Step 2

Once you have activated the previous step, execute step 2 to configure the adjustment rate IDs you want to use. These IDs consist of a grouping of wage types that will work together during the FLSA overtime calculation.

When changing the calculation method of this function, the following Adjustment Rate IDs are available by default:

  • Bonus rate with separated bonus method (BRSB): Calculated by dividing the bonus payment by the regular hours worked.
  • Regular rate with aggregated bonus method (RRAB):Calculated by adding the regular, overtime and bonus payments and dividing the result by the sum of the regular hours and the overtime hours.
  • Regular Rate with separated bonus method (RRSB): Calculated by adding the regular and overtime payments and dividing the result by the sum of the regular hours and the overtime hours. Then, calculated by dividing the bonus payment by the regular hours worked.

After selecting the adjustment rate ID you want to adjust, enter the wage types relevant for the processing of the adjustment and select how they are going to contribute to the adjustment rate. The possible values are:

  • Determined by Processing Class 85: The system uses the value configured in processing class 85 of the chosen wage type.

  • Contributes with Amount:The wage type contributes with the adjustment rate with the amount, ignoring the hours

  • Contributes with Hours:The wage type contributes with the adjustment rate with the hours, ignoring the amount

  • Output Only (Does Not Contribute):The wage type does not participate in the rate calculation. However, the total amount and total hours used in the calculation is stored in this wage type. You can only have one output wage type per adjustment rate ID.

  • Reevaluation Only (Does Not Contribute):The wage type does not participate in the rate calculation. However, the calculate rate is used to reevaluate this wage type.

Examples of the alternative processing logic

Using a single adjustment

In this scenario, your company uses a single adjustment rate to calculate premiums on overtime hours (RRAB - Regular Rate with aggregated bonus method). Since you want this adjustment rate to consider all regular, overtime and bonus payments, you enter all wage types that represents these payments, choosing the Determined by Processing Class 85 option. Furthermore, you want the result of the rate calculation to be stored in wage type /R00, so you must also enter this wage type, selecting the Output Only (Does Not Contribute)option.

Using multiple adjustment rates

  • In this scenario, your company pays premiums for the overtime hours by having the regular rate separated from the bonus rate. Therefore, you choose to use both RRSB (Regular Rate with separated bonus method) and BRSB (Bonus Rate with separated bonus method) adjustment rates:
  • Regular Rate:Calculated by adding the regular and overtime payments and dividing the result by the sum of the regular hours and the overtime hours.

  • Bonus Rate:Calculated by dividing the bonus payment by the regular hours worked.

To obtain the expected results, you must:

  • Configure RRSB with all the regular and overtime payments, choosing the Determined by Processing Class 85option. You should not enter the bonus payment wage type, as it is not part of the rate calculation. You might also enter wage type /R00selecting the Output Only (Does Not Contribute)option.

  • Configure BRSB with the regular payment wage types, selecting the Contributes with Hours option. You must also configure the bonus payment wage type and select the Contributes with Amount option. Since you want the overtime wage types to be reevaluated by this rate, without contributing with its calculation, you must also enter the overtime wage types, selecting the Reevaluation Only (Does Not Contribute)option. Lastly, if you want to also store this rate in a wage type, for example in wage type /R01, you must also enter this wage type, choosing the option Output Only (Does Not Contribute).






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