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How does PeopleSoft Calculate Hourly Rate

Tuesday, June 12, 2012

How does PeopleSoft Calculate Hourly Rate:

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



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