In PeopleSoft HCM, we define
Frequency ID’s that are defined on the
Frequency table, that are used for many different purposes, but one of the
usage of Frequency ID is to convert compensation calculations from one
frequency to another.
Each
Frequency ID that is defined is associated with a Annualization Factor. Frequency
Annualization Factor is the number of periods in one year for the frequency ID.
For example, a standard monthly frequency has the Annualization factor of 12.
If
you hire a Salaried Employee and provide a compensation rate with Annual
Frequency, how does PeopleSoft Calculate the Hourly Rate? What logic will it
use in converting the Annual Amount to Hourly Amount? We can take an Example of a Salaried Employee
who has a Compensation Rate of 6000.00 USD with a Monthly Frequency.
PeopleSoft
uses the below formula for Compensation Conversion Using Frequency:
Annual
compensation rate / job standard hours’ × frequency
factor of standard work period.
First the system annualizes
the Comp Rate for the given frequency, then for the Annualized Rate, the system
applies the above formula.
For monthly compensation of
6000.00 USD, it is first converted to Annualized rate, by applying the Annualization
factor of 12. This would become 72,000.00
USD.
Next
comes the Job Standard hour for the work period. If the standard work period defined is as ‘W’
(Weekly, with annualization factor of 52), and for this work period, if the
standard hours are defined as 40, then the above formula would be:
Hourly
Rate:
= 72,000.00
/ (40 * 52)
= 72,000 / (2080)
= 34.615385
