Just resolved it. Here's the program if you are interested:
<?xml version="1.0"?>
<xsl:stylesheet xmlns:xsl="http://www.w3.org/1999/XSL/Transform" version="1.0">
<xsl:output method="xml" indent="yes"/>
<xsl:template match="/">
<DT_IN>
<xsl:apply-templates/>
</DT_IN>
</xsl:template>
<xsl:template match="DT_IN/DATA">
<xsl:variable name="empid" select="PERNR"/>
<xsl:variable name="payperiod" select="PayPeriod"/>
<xsl:for-each select="PayRecord">
<DATA>
<PERNR>
<xsl:value-of select="$empid"/>
</PERNR>
<WageType>
<xsl:value-of select="WageType"/>
</WageType>
<Hours>
<xsl:value-of select="Hours"/>
</Hours>
<Payperiod>
<xsl:value-of select="$payperiod"/>
</Payperiod>
</DATA>
</xsl:for-each>
</xsl:template>
</xsl:stylesheet>