Costing
Costing in Oracle Fusion HCM means assigning payroll expenses to specific areas like
departments, cost centres, or projects for accurate tracking and financial reporting.
It helps organizations track expenses and manage financial reporting accurately.
Costing Type:
In Oracle Fusion HCM, Costing Types define how payroll costs are allocated and tracked
within the organization.
Costed: When a costing type is marked as "Costed," it means the costs for the specific
payroll element, payroll relationship, or assignment are calculated and transferred to the
appropriate financial accounts.
Distributed Costing: In Oracle Fusion HCM, the "Distributed" Costing Type allows payroll
costs to be split and allocated across multiple accounts, cost centers, or departments. This
type is particularly useful for organizations that need to divide an employee's costs between
various projects, departments, or other financial entities.
Fixed: In Oracle Fusion HCM, the "Fixed" Costing Type is used to allocate payroll costs to a
specific, predefined account or set of accounts that remain constant, regardless of the
employee’s assignment or payroll element activity. This type of costing is typically used for
fixed expenses that are not tied to variable factors such as work location, department, or
project.
Distribution group:
Distribution Group is a key feature in the costing configuration that allows for the
distribution of payroll costs across multiple accounts or entities
Costed Input value:
Costed Input Values in Oracle Fusion HCM refer to specific values associated with a payroll
element that are included in the costing process. These input values determine how much
of a payroll element’s amount will be costed and allocated to the General Ledger (GL).
e.g.
The "Pay Value" input value for a basic salary element can be marked as "Costed."
Cost Account
A Cost Account in Oracle Fusion HCM refers to the General Ledger (GL) account used to
track and allocate payroll costs, such as salaries, benefits, taxes, and other payroll-related
expenses, to the appropriate cost centers or projects.
Shows where the costs are spent e.g. salary, overtime
Offset Account
It is a GL account used to balance accounting entries (e.g., payments or liabilities).
Shows how the costs are funded or paid e.g., bank or clearing
Linkage of Costing in Payroll in Oracle Fusion HCM
Each payroll element (e.g., salary, bonuses, deductions) is configured with costing rules that
specify how its costs are recorded.
Costs can be allocated based on:
Percentage Allocation: Divide costs across multiple GL accounts (e.g., 70% to one
department, 30% to another).
Fixed Accounts: Assign costs directly to specific accounts.
Costing Hierarchy
The system uses a priority hierarchy to determine which cost account to use:
Element Entry Level
Element Eligibility Level
Payroll Relationship Level
Department/Organization Level
Payroll Level
Key Concepts in Costing
Element-Based Costing: Costs are assigned at the payroll element level (e.g., salary,
bonuses, overtime).
Distribution and Overrides:
Costs can be split across multiple segments, such as departments or projects.
Overrides allow flexibility in applying different costing rules for specific scenarios.
Configure Costing Setup in HCM
Define Costing for Payroll
Costing at the payroll level acts as a default costing for all elements in the payroll.
Path: Navigator → Payroll → Manage Costing for Payrolls
1. Select the payroll definition.
2. Define the default cost account (e.g., Cost Center, GL Account).
Costing for Elements
Define costing rules for specific payroll elements such as base pay, overtime, or allowances.
Path: Navigator → Payroll → Manage Costing of Elements
Steps:
1. Select the element you want to configure.
2. Add costing accounts for each segment (e.g., Department, Account).
3. Specify whether the costing is at the input value level or the element level.
Costing Overrides
Configure overrides for specific groups, employees, or projects.
Path: Navigator → Payroll → Manage Costing of Elements
Steps:
1. Specify the override level (e.g., assignment, element eligibility).
2. Assign different cost accounts for overrides.
Create Distribution for Cost Splitting
Split costs between different departments or projects (e.g., 70% to Department A
and 30% to Department B).
Path: Navigator → Payroll → Manage Cost Distributions
Process Costing
Run the Calculate Payroll Process
Ensure payroll has been calculated, as costing depends on processed payroll data.
Path: Navigator → Payroll → Submit a Flow → Calculate Payroll
B. Run the Transfer to Subledger Process
Transfer costing results to the General Ledger (GL) for financial reporting.
Path: Navigator → Payroll → Submit a Flow → Transfer to Subledger Accounting.
Review Costing Results
Use reports to validate costing results and ensure they align with financial
allocations.
Path: Navigator → Payroll → View Results
Reports:
1. Payroll Costing Report: Summarizes costs by element, department, or employee.
2. Costing Details Report: Provides a detailed breakdown of costs for validation.
