Define the payroll defaults in
> Setup > App Setup > Develop > Custom Settings
Click on Manage for Payroll Settings
Create Default Organization Level Value (in the top part of the screen):
The most important entries are
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Payroll Code (default)
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Overtime Min Week (regular work week in hours)
This screen also allows you to automatically close periods and determines what information is passed to the payroll system:
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Project
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Project Phase
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Project Line
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Activity Type
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Rework (Activity Type)