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FLSA Overtime Valuation Over Non-Discretionary Bonus

The FLSA (Fair Labor Standards Act) is the law regulating minimum wage, overtime pay, equal pay for equal work, child labor, and record keeping. It applies to all non-exempt employees, from the public and private sectors.

According to the FLSA standards, employers must pay the employee covered by the Act overtime pay for hours worked over 40 in a workweek at a rate not less than time and one-half their regular rates of pay (unless they are exempt).

To comply with this legal change, SAP has delivered updates to address to relevant technical changes to prepare for the following requisites:

  • Separation of bonus and regular rate of pay for overtime adjustments.
  • Overtime pay calculation over non-discretionary bonus.

What you need to know about the FLSA?

For more information on the legal change specifications, visit https://www.dol.gov/agencies/whd/flsa.

What you need to know about the FLSA in SAP system?

1 – Standard Calculation

  • In the standard system, the FLSA overtime is calculated by payroll function Regular Rate of Pay (FLSA Overtime Valuation) (RGRTE). The RGRTE function enables the overtime calculation when schema UT00 is updated according to FLSA regulations. Learn how to make the required calculation settings in Help Portal.

Schema UT00 and UTR0

The system uses processing class 85 of the wage types to calculate a single Regular Rate of Pay (stored in wage type /R00), which represents the hourly rate of pay of the employee in the given week. Depending on the value assigned to the processing class 85, the wage type contributes with the amount and hours to wage type /R00. Then, the system uses /R00 to reevaluate the relevant wage types, also based on the value assigned to processing class 85.

According to the values set in processing class 85 (see below), RGRTE determines the so-called ‘Regular Rate of Pay’ for each work week, and valuates the relevant wage types with this rate.

Processing class 85 values are:

0 = No influence from or to Regular Rate (RR)

1 = Contributes to RR with number and amount, not valuated with RR

2 = Contributes to RR with amount only, not valuated with RR

3 = Contributes to RR with number and amount, is valuated with RR

4 = Contributes to RR with amount only, is valuated with RR

5 = Does not contribute to RR, is valuated with RR

  • In transaction SPRO go to Payroll USA Fair > Labor Standards Act (FLSA) and execute its activities. For more information, such as dependencies and examples, refer to the documentation of the Customizing activities in your system.

SPRO%20in%20Payroll%20USA

SPRO in Payroll USA

Wage types configuration

To have valid wage types for overtime and non-discretionary bonus calculation in the function Regular Rate of Pay (FLSA Overtime Valuation) (RGRTE), you need to ensure the following wage type configuration:

Standard calculation:

  • Wage types with processing class 85 configurated to contribute with amount, number and be evaluated.
  • Wage types with a variable split (V0 split) of type W in V0 table.
  • Both only in the current period.
FAOH:
  • Wage types configurated in view V_T596J_US_FAOH to contribute with amount, hours, be reevaluated and an output wage type.
  • Wage types with a variable split (V0 split) of type W in V0 table.
  • Both only in the current period.
NDB:
  • Wage types configurated in view V_T596J_US_NDB to contribute with amount, hours, be reevaluated and an output wage type.
  • Wage types with a variable split (V0 split) of type W in V0 table.
  • Both for all the non-discretionary bonus reference dates.

2 – FLSA adjustment rate for overtime hours (FAOH)

You can use this processing mode for payroll function RGRTE. When Subapplication FAOH – FLSA adjustment of overtime hours is activated, the system allows you to create and use multiple adjustments rates instead of only /R00. The processing enables you to configure a set of wage types that will be used to calculate an adjustment rate using adjustment IDs. For example, you can have an adjustment rate considering only regular and overtime payments, while having another one considering only bonus and overtime payments. These IDs consist of a grouping of wage types that will work together during the FLSA overtime calculation.

By default, SAP delivers the following Adjustment Rate IDs:

  • RRAB – Regular Rate with aggregated bonus method
  • RRSB – Regular Rate with separated bonus method
  • BRSB – Bonus Rate with separated bonus method

After selecting the adjustment rate ID you want to adjust, enter the wage types relevant for the processing of the adjustment and select how they are going to contribute to the adjustment rate. The possible values are:

    • Determined by Processing Class 85: when this option is selected, the system will use the value configured in processing class 85 of the chosen wage type.
    • Contributes with Amount: when this option is selected, the wage type will contribute with the adjustment rate with the amount, ignoring the hours
    • Contributes with Hours: when this option is selected, the wage type will contribute with the adjustment rate with the hours, ignoring the amount
    • Output Only (Does Not Contribute): when this option is selected, the wage type will not participate in the rate calculation. However, the total amount and total hours used in the calculation will be stored in this wage type. You can only have one output wage type per adjustment rate ID.
    • Reevaluation Only (Does Not Contribute): when this option is selected, the wage type will not participate in the rate calculation. However, the calculate rate will be used to reevaluate this wage type.

3 – FLSA NDB adjustment rate for overtime hours (NDB)

The payroll function RGRTE has three processing modes. One of them is Adjusting the regular rate according to non-discretionary bonus, which is a function call with the parameter NDB (FLSA NDB adjustment rates for overtime hours). This function calculates the difference between the originally calculated FLSA overtime and the FLSA overtime calculated with the non-discretionary bonus.

In order to do that you just have to go through the following steps:

  1. Activate the non-discretionary bonus processing in schema UAP0.
  2. Maintain overtime adjustment using non-discretionary bonus processing.
  3. Activate the Sub application NDB and enter the start and end dates for which you want the new processing to take effect. You do this in table view V_T596D.

After enabling the processing with non-discretionary bonus, you can enter the bonus in infotypes Additional Payments (0015) and Additional Off-Cycle Payments (0267). When entering the bonus, you also enter the bonus reference period. You can learn more about how to set up your system correctly in Help Portal .

PA30 – Additional Payments (0015) and Additional Off-Cycle Payments (0267) infotypes

When editing Additional Payments (0015) and Additional Off-Cycle Payments (0267) infotypes for an employee, you must enter the amount of the bonus payment with the start and end dates defined in the Reference Period for Payment group box.

In Additional Payments (0015) infotype, you enter a non-discretionary bonus related to work done and usually is paid in the next payroll run.

Additional%20Payments%20%280015%29%20infotype

Additional Payments (0015) infotype

In Additional Off-Cycle Payments (0267) infotype, you enter an off-cycle payment that is related to a bonus, but different from infotype 0015, you can run an off-cycle payroll on any day.

Additional%20Off-Cycle%20Payments%20%280267%29%20infotype

Additional Off-Cycle Payments (0267) infotype

The data you enter in both infotypes is read by payroll function RGRTE, when called with parameter NDB.

You can learn more about the infotypes in our documentation in SAP Help Portal under: Overtime Valuation According to FLSA Standards, choose Additional Payments Infotype (0015): Features for United States or Additional Off-Cycle Payments Infotype (0267): Features for United States . You can also find the calculation examples and how infotypes are used in the FLSA: How to Configure Overtime Pay Calculation Over Non-Discretionary Bonus video in FAQ of this blog as well as in system documentation.

Important SAP Notes:

All SAP Notes with changes related to FLSA must be applied. You can refer to the SAP One Support Launchpad to see the complete list of SAP Notes.

  • 2929225 – FLSA: Overtime Pay Calculation Over Non-Discretionary Bonus (Payroll changes)

Prerequisites

As a prerequisite, you must have the following SAP Notes installed and their manual steps performed:

  • 2637755 – FLSA: Separation of Bonus and Regular Rate of Pay for overtime adjustments
  • 2923573 – FLSA: Overtime Pay Calculation over Non-Discretionary Bonus (Infotypes)
  • 2941894 – FLSA: Prerequisite objects for SAP Note 2929225
  • 2947032 – US Infotype Reader & Primary-Secondary Infotype Pairing

Frequently Asked Questions – FAQ

1- How to calculate FLSA using RGRTE function? 

See sections 1,2 and 3 of this blog.

2- How can I make settings for FLSA calculation using the three possible processing modes? 

For more information on how to configure FLSA, you can watch the following videos:

Watch this videoSAP ERP HCM US – FLSA: How to Configure Your System to Process Overtime According to FLSA Standards

Watch this videoSAP ERP HCM US – FLSA: How to Configure Overtime Pay Calculation Over Non-Discretionary Bonus

3 – How to use 0015 and 0267 infotypes for FLSA Non-discretionary bonus?

Just fill in the Reference period for payment dates in case of a Bonus payment. For more details, watch the videos linked in question 3.

4 – What’s the difference between 0015 and 0267 infotypes?

Both infotypes can be used for Bonus payments. The only difference is that Infotype 0267 (Additional Off-Cycle Payments) is, in general used for specific off-cycles.

5- Is the reference period fields available only for bonus wage types or all wage types?

For all wage types. Payroll checks if the WT corresponds to bonus payment, depending on its processing class. If it does, the Reference Period for payment dates will be used.

6- Would the dates on IT0015 and 0267 be able to be done in a prior year?

Yes, as long as you have FLSA relevant wage types for that reference period. It’s also necessary to have valid configuration for RGRTE during all the bonus reference period. Check how to configure it in the videos linked in FAQ – Question 3 or the Help Prdocumentation linked in section 3 – FLSA NDB adjustment rate for overtime hours (NDB).

7- When RGRTE calculates the overtime, can we assign different overtime wage types to gather the total hours of overtime, or is it reading a standard wage type?

Yes. The relevant wage types that will impact the total hours of overtime in RGRTE can be customized in the view according to customer’s needs. The overtime wage types can be considered as overtime wage types, as long as they are configured in the views with the Variable Split (V0 Split) of type ‘W’.

8- Which report was the one that will create the dates on IT0015 and 0267 at the bottom please?

When you install the SAP Notes/SP, you need to run report RPUPAV00 to create the secondary infotype entries. This is a one-time process.

 

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All the best, and happy reading!

Virginia Soares

User Assistance Developer

1 Comment
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  • Thank you Virginia for a detailed blog. We’re deploying these changes soon in our customer system.

    Will replicate the scenarios and test the functionality and let you know if there any questions.

    Thank you SAP for the process improvement.

    Madhav