This topic contains the following information:

• The processing priority range and default priority for each classification.

• The predefined categories for each classification. You can add more categories, which are defined as Lookups.

• A description of the function of elements within each classification and category.

When preparing to define your elements, use this information to determine their taxability rule (such as how an earning affects the calculation of ISR, IDW, and Social Security).

Primary Classification Processing Properties and Cost Types

The following table lists the primary classifications for elements. Priority indicates the order of how Oracle Payroll processes each element into a payroll run. Default represents the default priority for that classification. Cost Type indications whether elements of that classification are deductions (D) or earnings (C).

Predefined Element Secondary Classifications

Rather than categories, Mexico uses secondary classifications for taxation, tax exemption rules, and IDW calculations. You can assign multiple secondary classifications to an earning.

Refer to the following sections for details on the predefined secondary classifications:

• Earnings

• Imputed Earnings

• Supplemental Earnings

For some states, in order to make an earning subject to state tax, you must attach some classifications to the earnings element, along with the Subject to Employer State Tax classification.

See: State Subject Secondary Classifications

Amends

Amend or indemnification is the payment of the following earnings: Seniority Premium, 3 months salary, 20 days per year of service, and optionally, a Separation Bonus. All elements assigned the Amends classification feed the Amends balance. You can process amends with regular earnings. The tax calculation uses taxation rules for amends when that particular element balance is non-zero. You can mark the Amends element as either Separate Payment or Process Separately.

Earnings

Use this classification for regular earnings (fixed and variable), absences and leaves, and special earnings paid in addition to earnings for time worked (such as bonuses or sick pay).

Earnings classification elements represent earnings for time worked (such as salary and hourly wages).

The following table shows the predefined secondary element classifications for the Earnings classification:

Employer Liabilities

Elements producing non-tax payments that employers make on behalf of their employees belong in the Employer Liabilities classification.

Imputed Earnings

Use this classification for regular earnings (fixed and variable), absences and leaves, and special earnings paid in addition to earnings for time worked (such as bonuses or sick pay).

Elements in the Imputed Earnings classification are for non-cash remuneration, such as personal use of a company-provided car or company-paid premiums for group term life insurance.

The following table shows the predefined secondary element classifications for the Imputed Earnings classification:

Information

Many elements do not belong in any of the classifications described above, but nonetheless hold many different types of information you need. These elements belong in the classification Information.

This classification is especially useful for elements that you do not want to process in Oracle Payroll. Such elements might, for example, hold information about tangible items issued to employees, such as cellular phones, identification badges or company cars. Sites that do not include Oracle Payroll use elements in this classification to hold information about employee compensation and benefits.

Non-Payroll Payments

Elements in this classification produce payments made to employees through the payroll system that are not true earnings.

Because payments in this classification are not earnings, they are never subject to taxes and never feed balances of taxable pay. Payments resulting from the processing of Non-Payroll Payments elements always appear separately from earnings in reports and balance totals.

Pre-Tax Deductions and After Tax Deductions

Pre-Tax Deductions are those deductions that reduce the taxable basis for any tax (Federal or state). This kind of deduction is not very common.

Other non-tax deduction elements fall into one of two classifications, either Voluntary Deductions or Involuntary Deductions. Loan repayments, credit union deductions, insurance premiums, and charitable contributions are examples of voluntary deductions. Deductions for court-ordered wage attachments (such as tax levies, child or spousal support, or bankruptcy orders) fall into the classification Involuntary Deductions.

Supplemental Earnings

Use this classification for regular earnings (fixed and variable), absences and leaves, and special earnings paid in addition to earnings for time worked (such as bonuses or sick pay).

The Supplemental Earnings classification includes a variety of special earnings paid in addition to earnings for time worked.

The following table shows the predefined secondary element classifications for the Supplemental Earnings classification:

Tax Deductions, Tax Credits, Employer Taxes

Deductions for employee tax withholding fall into the classification Tax Deductions.

Tax credits employers pay to employees belong in the Tax Credits classification.

Oracle Payroll comes with all the necessary elements and calculations for tax deductions, tax credits, and most employer taxes already in place.

See: Tax Balances