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Time categories are a sort of big umbrella to group and report on timecards entry. Its value can also be used inside fast formulae.
From the Oracle® Time and Labor Implementation and User Guide Release 12 Part No. B31652-02:
+"You can define time categories for reporting purposes and to identify the time to be analyzed by time entry rule formulas. For example, you can define categories for particular projects, or for vacation, or overtime."+
+"A time category is a group of mapping components that can appear on a timecard - such as elements, projects, or tasks - with one or more specific values for each component. For example, you could define the category Regular Time containing the elements Regular Salary and Time Entry wages."+
+"Time Categories can contain other time categories, as well as individual components. For example, you could define time categories for Sickness and Vacation, then define a third category called Absence that contains these two categories."+