By Neeraj Garg
Continuing from last week’s blog article, new enhancements in Oracle E-Business Suite Projects Applications Release 12.2 allow companies to address various project costing requirements without the use of extensions. There are three key enhancements:
- Total Time Costing
- Costing Using HR Rates, and
- Costing Using Payroll Actuals.
Total Time Costing
This enhancement addresses the need to cost labor transactions using effective rates, and especially to encompass exempt employees who do not get paid for overtime work. Like Standard Costing, this enhancement works with standard rates. However, it computes an effective rate for costing labor transactions based on total time charged for a period and the base hours for that period.
There are three new setup elements that are needed to enable Total Time Costing:
- Effective period (typically, this will be “weekly”)
- Base hours
- Enabling Total Time Accounting – new Costing Method for Labor Costing
With these three elements enabled, the effective rate used for costing labor transactions is now computed using the following three-step formula:
I. Base Hours/Charged Hours * Derived Rate = Effective Rate
II. Effective Rate * Charged Hours = Raw Cost (Labor)
III. Labor Raw Cost * (1 + Burden Multiplier) = Total Burdened Cost (Labor)
In addition, if Total Time Costing is enabled and a new or adjusted transaction is introduced for a person for a previously costed period, the solution does not re-cost all transactions in that previous period. That is, it leaves them at the old rate rather than applying the new rate that was derived using the new total charged hours.
Overall, this enhancement allows users to accurately cost labor for exempt employees. It also allows organizations to meets federal contracting rules for exempt employees, as spelled out in the DCAA Contract Audit Manual, Section 9.
Costing Using HR Rates
This enhancement enables organizations that hold employee rate information in Oracle HR to directly use these rates for project labor costing. This feature is enabled by setting Rate Source in Oracle Projects to “HR” in the costing rule allocation. Rates are then retrieved from the Oracle HR rate matrix using “Rate by Criteria.”
There are many standard criteria available for setting up matrix rates in Oracle HR. Users can also add custom criteria to the rate matrix; these criteria can even call for rates at the project and task levels, if that degree of granularity is needed. Typically, the most commonly used criteria in a matrix are “job,” “location,” and “work type.” A new Project Timecard Template in Oracle Time and Labor has been seeded with these three attributes.
HR rates may also be enabled for use in planning when companies need to compute labor costs in budgets and forecasts.
This enhancement can also play a role in compliance. For example, many companies will benefit from the fact that it enables support for the Davis-Bacon Act in the U.S., which requires companies to pay minimum prevailing wage rates for construction work done at a given location. Also, because the HR rates used in calculations are the actual rates paid to employees, it is very important that labor-cost information security be carefully considered and implemented prior to enabling this enhancement.
In the next blog article we will discuss Costing using Payroll Actuals.