The following video illustrates the topic of Defining Grades, Grade Rates, and Grade Ladders in Oracle Fusion HCM

Grades
Grades are created to record the level of compensation for workers. You can create grades for multiple pay components, such as salary, bonus, and overtime rates. You can define one or more grades that are applicable for jobs and positions. This list of valid grades, combined with the settings for two profile options, enables you to restrict the grades that can be selected when you set up assignments or employment terms for a worker.
Grades and Sets
You assign each grade to a set. If you assign a grade to the common set, then the grade is available for use in all business units. If you want to limit a grade to a single business unit, you can assign it to a set that is specific to that business unit. 

How Grades Work with Jobs and Positions
You can define one or more grades that are applicable for each job and position. This list of valid grades, combined with the settings for two profile options, enables you to restrict the grades that can be selected when you set up assignments or employment terms for a worker.
If you use positions, then the grades that you assign to jobs are the default grades for the positions that you associate with each job. You can use the default grades for the position, remove ones that don't apply, or add new ones
How Grades Work with Assignments and Employment Terms
When you set up assignments or employment terms, you can select the applicable grade for the job or position. Two profile options determine the grades that are available for selection.
The first profile option is PER_ENFORCE_VALID_GRADES. If you set this site-level profile option to Yes, then users can select a grade only from the list that you defined for the job or position.
If users select both a job and a position for the assignment or employment terms, then they can select grades that are valid for the position only. If valid grades are defined for neither the job nor the position, then users can select from all grades If you set this profile option to No, which is the default value, then users can select from all grades.
The second profile option is PER_DEFAULT_GRADE_FROM_JOB_POSITION. If you set this site-level profile option to Yes, and there is only one valid grade for a job or position, then that grade is used by default in the assignment or employment terms. In addition, if an entry grade is defined for a position, then that grade is used by default when the user creates a new set of employment terms or a new assignment.If you set this profile option to No, which is the default value, then users can select from all grades
Grade Steps
Grade steps are distinct increments of progression within a grade. You can set up grades with or without grade steps.  The following figure illustrates the difference between grades with and without steps. 

Lookups for Grade Rates
Lookup types are lists of values in applications. One lookup type is available for grade rates, and the customization level is extensible.  The GRADE_PAY_RATE_TYPE lookup type identifies the compensation components for which you want to set up grade rates. The predefined values are salary, bonus, and overtime. You should review these predefined values, and add additional rate types to suit your business needs.
Grade Rates
Grade rate values are the compensation amounts associated with each grade. You can set up rates at the same time that you create grades, or set them up independently from grades. For grades with steps, you set up the step rates when you include them in a grade ladder. Grade rates are optional.
Grade rates contain the pay values that are related to each grade. Grade rate values can be either a fixed amount or a range of values, and you can set up rates for different types of pay, such as salary, overtime, and bonuses.
Grade rates for some jobs or positions might include an hourly salary rate and an overtime rate. Grade rates for other jobs or positions might contain a salary rate type with a range of amounts and a bonus rate type with a fixed amount. Grade rates typically serve only as a guideline to validate that the salary you propose during the compensation process for a worker on a certain grade is appropriate for that grade.
Grade Rates and Legislative Data Groups
You assign a legislative data group to each grade rate. Depending on how your enterprise is configured, you may have several legislative data groups. You can set up grades that are shared across different areas of your business, and then enter rates that are specific to each legislative data group.
Grade Rates and Grades
You can set up grade rates when you set up grades, or you can set them up independently from grades. For grades with steps, you enter rates when you attach the grades to a grade ladder.
Grade Ladders
Create grade ladders to group grades and grades with steps in the sequence in which your workers typically progress. Grade ladders describe the grades and steps to which a worker is eligible to progress and compensation value associated with that grade and step. You can set up separate grade ladders for different types of jobs or positions in your enterprise. For example, you may create three grade ladders for your enterprise: one for technical grades, another for management grades, and a third for administrative grades. Two types of grade ladders are available
Ladders with Grades
You create ladders with grades by building a hierarchy of grades that were created without steps. When you set up this type of ladder, only grades without steps are available to add to the ladder. You do not define any grade rates when you set up a ladder with grades; the rates for the grades within the ladder are inherited from the rates that were added when you set up the grades. To add or edit rates for grades, you must use the Manage Grade Rates task.
Ladders with Grade Steps
You create ladders with grade steps using grades that were created with steps. When you set up this type of ladder, only grades with steps are available to add to the ladder. You define step rates and the values for each step when you set up the ladder, and the rates are unique to each ladder. You cannot share step rates between grade ladders.
You cannot create a grade ladder with a combination of both grades and grades with steps.
You create ladders with grade steps using grades that were created with steps When you set up this type of ladder, only grades with steps are available to add to the ladder.  You define step rates when you set up the ladder, and the rates are unique to each ladder. You cannot share step rates between grade ladders.
Grades, Grade Rates, Sets, and Legislative Data Groups
You assign grades to sets, and you assign grade rates to legislative data groups. If you have grades that are common across multiple business units, you can assign the grades to the set that is associated with the business units, and then set up grade rates that are specific to each legislative data group.
The following figure illustrates how you can use sets to share grades across multiple business units and then change the grade rates for each legislative data group.

Grade Rates and Legislative Data Groups
Grade rate values are associated with each component of compensation for your workers. While grades may be common across different areas of your enterprise, grade rates vary among the countries in which you employ people. For example, if your enterprise has engineer jobs in the United States, the United Kingdom, and Australia, you can set up grades for a set that is shared between the countries, but set up different grade rates for each country in the applicable currency.

Jayashree Prakash

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