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How to Create Salary Basis in Oracle HCM Cloud Applications

Creating a salary basis in Oracle HCM Cloud Applications is a crucial step in setting up an organization's compensation structure. A salary basis defines how an employee's salary is expressed (e.g., annually, hourly), how it's calculated, and how it's linked to the payroll system. It's a foundational element that ensures consistency and accuracy in compensation management.


Here is a general outline of the steps to create a salary basis, with the understanding that specific details may vary based on your organization's configuration and the specific type of salary basis you need to create.

Prerequisites

Before you can create a salary basis, you typically need to have completed the following:

~Create Payroll Elements: You must first create the underlying payroll elements that will hold the salary information. This includes elements for base pay, allowances, and any other components of the salary. These elements define how the salary will be processed in payroll.


~Define Legislative Data Group (LDG): The LDG is a logical grouping of payroll and HR data that a payroll administrator can access. The salary basis is always linked to an LDG.

~Have the Right Privileges: You need a role with the necessary privileges, such as a Compensation Manager or Compensation Administrator.

General Steps to Create a Salary Basis

1. Navigate to the Salary Basis Task:

Log in to Oracle HCM Cloud with a user role that has the required security privileges.

Go to My Client Groups and then click on Compensation.

From the list of tasks, select Salary Basis.

2. Start the Creation Process:

On the Salary Basis page, click the Create icon (usually a plus sign or a button labeled "Create").

3. Provide Basic Information:

Name: Give the salary basis a descriptive name (e.g., "US Annual Salary," "UK Hourly Wage").

Legislative Data Group: Select the appropriate LDG for this salary basis.

Frequency: Choose the frequency at which the salary is paid (e.g., Annually, Monthly, Hourly).

Annualization Factor: This is the number that the system uses to convert the salary frequency to an annual amount. For an annual salary, the factor is 1. For a monthly salary, it's 12. For a weekly salary, it's 52, and so on.

Decimal Places to Display: Specify how many decimal places should be shown for the salary amount.

4. Define the Salary Basis Type:

This is a critical step where you decide how the salary amount will be determined. Oracle HCM Cloud offers different types of salary bases:


Salary amount is determined by user: This is a simple type where a user manually enters the total salary amount.

Salary amount is determined by simple components: This allows you to break down the salary into a few main components.

Salary amount is determined by incremental components: This is useful for more complex salary structures with multiple components.

Salary amount is determined by rates: This is a very flexible option that lets you use rate definitions to calculate salary components based on various criteria (e.g., grade, years of service, location). This is often used for calculating allowances, bonuses, and other variable pay components.

5. Link to Payroll Elements (if applicable):

Depending on the salary basis type you selected, you will need to link it to the payroll elements you created earlier. This tells the system where to store the salary amount and how to pass it to the payroll engine for processing. You might have one element for the base salary and other elements for components like allowances.


6. Add Grade Rates (optional):

If your organization uses grade rates to define salary ranges for different jobs or grades, you can associate a grade rate with the salary basis. This helps with validation, ensuring that a user-entered salary falls within the acceptable range for that grade.

7. Review and Save:

After entering all the required information, review the configuration to ensure it is correct.

Click Save and Close or Submit to finalize the creation of the salary basis.

Post-Creation Steps
Once the salary basis is created, it can be assigned to an employee during the hiring process or when their salary is updated. The salary basis will then dictate how their compensation is managed, displayed, and processed by the system.

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