4 Mar 2015 11:00 AM This is the fourth post in a series related to the new functionality introduced in Dynamics AX 2012 R3 CU8. Several new features were added in the HR and Payroll areas based on customer feedback. Features to be covered in the series include: Total compensation statement, FMLA tracking, Premium earning generation, Regular rate of pay, Benefit accrual enhancements, and Forecast position enhancements. Be sure to subscribe to updates for our blog to learn about this new functionality Regular Rate of Pay The Fair Labor Standards Act (FLSA), which prescribes standards for the basic minimum wage and overtime pay, affects most private and public employment. It requires employers to pay covered employees, who are not otherwise exempt, at least the federal minimum wage and overtime pay of 1.5 times their regular rate of pay. If a worker gets an hourly rate and nothing more, the regular rate of pay is simply the hourly rate. In this scenario, an overtime earning code can be created for 1.5 times the hourly rate and overtime hours are assigned against that code. However, if a worker gets a shift differential, if productivity bonuses are given, or any other payment that is considered part of the compensation package, then those amounts have to be included in the regular rate of pay calculation. To enable the proper regular rate of pay calculation, you can now create an earning code using the new “Regular Rate of Pay” basis and the system will calculate the overtime premium in accordance with the FLSA. Create Work Periods and Workweeks The FLSA defines the most common workweek as a fixed and regularly recurring period of 168 hours (i.e. seven consecutive days). There are FLSA exceptions to the 168 hour workweek such as a 28-day work cycle for firefighters. Refer to the Federal FLSA guidelines to find other exceptions. The workweek does not have to coincide with the calendar week, but instead it may begin on any day of the week. Once the beginning time of an employee’s workweek is established, it remains fixed regardless of the hours the employee is scheduled to work. Overtime must be paid for every hour over 40 that is worked in the workweek. In order to calculate the regular rate of pay, you must first establish work cycles and work periods. A “work period” is equivalent to an FLSA workweek and a “work cycle” refers to a fixed group of regularly recurring work periods. The steps for creating work cycles and work periods are as follows: Open the work cycles and periods form by going to Payroll > Setup > Work cycles and periods Click New and create a new 7 day work cycle, entered as follows: Work cycle: Weekly 7 Day Description: Weekly 7 Day Days per period: 7 Press CTRL-S or tab off the field to save the record Click the Generate periods button and enter work period details First work period start date: 08/17/2014 (Tip: to sync weekly work periods with weekly pay periods, pick the start date of an established pay period) Number of work periods: 52 (Tip: create enough work periods to cover the last pay period that has been generated) Click Create to generate the work periods Associate Work Cycles to Positions Your company may only need one work cycle but, it’s more likely that you have several. To ensure that the proper workweek is used in the Regular Rate of Pay calculation, the work cycle must be associated to the position. The steps to associate work cycles to positions are as follows: Open a Position form by going to Payroll > Common > Positions > Positions Open the Payroll fast tab and click Edit Select the appropriate Work cycle (Tip: The payroll fields are date effective. To have the association begin on a previous date, select Maintain versions and add the work cycle on the date effective form) Close the position form Create a Regular Rate of Pay Earning Code Group An earning code group defines the list of earnings that are applicable to the Regular Rate of Pay calculation. For example: regular pay, shift differentials and performance bonus are counted as earnings in the calculation while vacation pay and a uniform allowance are not. The steps to create an earning code group are as follows: Open an Earning code groups form by going to Payroll > Setup > Earnings > Earning code groups Click New to create an Earning code group, entered as follows: Earning code group: RRP Codes Description: Regular RRP Codes Click Add and create a list of all earning codes that contribute to regular rate of pay earnings Create an Overtime Premium Earning Code A new rate basis called “Regular rate of pay” has been added to the earning code form. The steps to setup an Overtime premium using the new Regular rate of pay basis are as follows: Open the Earning code form by going to Payroll > Setup > Earnings > Earning codes Click New to create a new earning code, entered as follows: Earning code: Overtime premium Description: Overtime premium Unit of measure: Each Include in payment run type: Primary and additional Productive: Unchecked Base earning component: Unchecked Rate basis: Regular rate of pay Amount or multiplier: 1.5 (note: this indicates 1.5 overtime premium rate) (Tip: to create a 2x overtime premium, enter 2.0, and so on) Basis earning code group: RRP Codes (Note: you may have multiple Overtime premium code that use different earning code groups) Leave all other fields defaulted Using the Overtime Premium Earning Code When you add an earnings statement line and select the earning code with this new basis on an earnings statement, the system automatically calculates the regular rate of pay for the work period and uses it to determine the amount of the overtime premium. Add an earnings line and set the earning date Select the Overtime premium code The rate for the Overtime premium is calculated and displayed as follows: The work cycle is determined from the Position on the overtime premium earnings statement line. The earning date on the line is matched to a work period within the work cycle. The productive hours for all earnings statement lines in the work period are summed. (note: this may include lines from prior earnings statements) The earnings from all earnings statement lines in the work period are summed. (note: this may include lines from prior earnings statements) The total earnings are divided by the total hours. The result is the Regular Rate of Pay. The Overtime premium is determined by multiplying the Regular Rate of Pay by the (overtime premium multiplier – 1) Enter the number of Overtime hours into the earnings statement line quantity field and the total overtime premium is calculated and added to the statement. The work period and pay period are in sync – Mon 12/31/2012 to Sun 1/6/2013. The employee’s normal hourly rate is $18.11 per hour. The employee has 50 hours in this work period (5 days at 10 hours per day). The employee has a $200 bonus in this work period The Regular Rate of Pay calculation is as follows: $18.11 x 50 hours = $905.50 of Regular pay $905.50 + $200 bonus = $1105.50 in total earnings $1105.50 / 50 hours = $22.11 Regular Rate of Pay The Overtime premium rate is then calculated as follows: Overtime premium multiplier = 1.5 1.5 – 1 = .5 premium multiplier $22.11 x .5 = $11.0550 overtime premium rate The overtime premium amount is calculated as follows: 50 productive hours – 40 FLSA regular hours = 10 overtime hours 10 x $11.0550 = $110.55 Overtime premium add to the earnings statement. Summary This new capability to set up an earning code with a Regular Rate of Pay basis, combined with the ability to create and maintain work cycles and periods, allows the system to accurately calculate the regular rate of pay and determine the overtime premium adjustment to ensure you are always in compliance with the FLSA.