The payroll process comprises multiple steps involving configuration and integration. How can you get the most ROI from your SAP solutions? How can you make processes less manual? What SAP ERP functionality is available to you that you have not yet utilized, such as Payroll Control Center?
HR 2017 speaker Mike Timm answered reader questions on automating and streamlining your SAP payroll process. Mike took questions on adopting new functionality and configuring existing functionality, such as:
- How do you automate the payroll comparison process between months
- Is it possible to process payroll in SAP SuccessFactors?
- As far as SAP S/4HANA, will the Payroll configuration and processes go through a change?
- Do you foresee pros and cons between a semi-monthly vs. biweekly payroll process, especially when the time sheet is considered?
- What are the technical prerequisites to adopting Payroll Control Center?
Read the full transcript of the discussion below.
Welcome to today’s live Q&A. I am pleased to be joined by Mike Timm. Mike is Founder and Managing Partner at ICG. He will be answering your questions today on best practices for improving your SAP payroll process.
Thanks for having me. I look forward to the Q&A's to provide my knowledge and experience. They also help me get a pulse of what topics people are interested in right now.
Comment From Nagendra
When Basic pay is changed for an employee with retro date and payroll is run with arrears, previous month Basic pay gets changed in all the reports. Eg. April, may & june Basic is INR 50,000, In July it is revised to INR 60,000 effective April (with INR 30,000 as arrears). Now when I run April Payroll report - Basic will be INR 60,000.
I would need to know which report you are running to gain a better understanding of the question. If the report were looking at Infotype 0008, I would expect INR 60,000 to be displayed for April since the effective date of 60,000 was set to April. If you are looking at a payroll report, there are typically settings to show the original amounts with retro activity amounts split or the original and retro activity amounts combined.
Comment From THANGARAJ-RANE
Can you give a quick comparison of the inputs from time to payroll?
Typically, we think of time wage types generated during time evaluations that are then picked up during payroll processing. Time evaluation can also provide cost object overrides, premium indicators, and quota updates to name a few.
Comment From THANGARAJ-RANE
How do you automate the payroll comparison process between months?
Wage Type Reporter (H99CWTR0) allows you to compare pay periods by wage type utilizing percentage or amount differences. There are also several third-party reporting tools that I have found very helpful.
Comment From Sridhar
Is it possible to process payroll in SAP SuccessFactors?
I believe you are referencing SAP SuccessFactors Employee Central Payroll. SF ECP provides payroll processing for many countries, not as many as on-premise, but SAP is working on getting there. The functionality is very similar because SF ECP is actually an SAP on-premise system.
Comment From Tracy
As far as SAP S/4HANA, will the Payroll configuration and processes go through a change or be taken out?
Tracy, you ask a very good question that many people are looking to understand. I have been getting this question more and more, not just from HCM/Payroll professionals, but from other areas as well. S/4HANA does not have HCM or Payroll built in like the previous version of SAP did.
Instead, you have to determine which of the options SAP has outlined to move forward.
1. If you are currently running HCM as a standalone instance, the transition can be quite simple. The ALE (application link enabling) you have setup just points to a different location and the base payroll configuration can remain the same. The assumption is the modules receiving the data now in S/4HANA have not gone and revamped everything. Then, payroll will need to adjust, but it is still the simplest transition. Keep in mind what simple means when talking about SAP though - simple <> easy
2. If HCM is currently in the same system as the rest of the modules, then you have to look at whether HCM should remain on ECC6 or move to SuccessFactors.
a. Remaining on ECC6 will require the implementation of ALE functionality (not overly difficult) to pass data between the HCM on ECC6 and S/4HANA. Again, disruption is minimal if the other modules do not revamp their setup.
b. Obviously, moving to SuccessFactors is a project unto itself with the need for process redesign, data migration, etc. SAP has built the integration points between SF and S/4HANA.
3. SAP has rolled out Managed Payroll where you outsource the technical and support piece. You no longer have the HCM system; it is housed by SAP, and supported by third-party vendors SAP has approved. This type of scenario has been around for years with the exception of the contract being on SAP paper. I would be very cautious with this method and make sure the details are hammered out regarding SLAs, what is included as the maintenance fee, and what would be considered as additional charge.
Comment From SVenkat
Does it make sense to implement payroll control center if you have a HANA project in the near term (1-2 years)? Should we wait for the SAP HANA implementation to finish?
This really depends on your current on-premise status. If you are on Enhancement Package 7, running HR Renewal 2.0, and SAP NetWeaver 7.4, the implementation is probably very feasible/justifiable for a 2-year period.
The other consideration is if the rest of the SAP modules are moving to S/4HANA, will HCM remain on ECC6 or move to SuccessFactors.
If HCM will remain on ECC6 for the foreseeable future, then I would be very inclined to implement the Payroll Control Center.
Comment From Kim
What version of SAP does this Q&A apply to?
Most of the information can be applied from R/3 to ECC6 with the exception being the Payroll Control Center.
Comment From Kim
How do customers handle short/holiday weeks when the time processing and payroll are automated? For example, payroll normally processes on Monday night. Monday is a holiday, so payroll must be delayed until Tuesday afternoon.
This is where some automation can come in handy. Using standard SAP programs in a batch job we could transfer CATS to Infotypes, run time evaluation, release payroll, run payroll, and generate reports.
Many of those steps can also be scheduled through a regular process model as well with stop points built in along the way to validate errors.
Getting the ACH file out is what I have seen as the typical driver for payroll departments to get payroll finished. I have seen some contact the bank and say because of holidays we will be delayed. Typically, the bank in understanding and will help get things pushed through.
Comment From Chris
Hello Mike, Thanks for taking our questions. What tools are out there, both for standard SAP and third party solutions that can help us automate the payroll? In addition, how robust is SAP Process Model?
Glad to help. The SAP Process Model is probably the best option available if you are not running the Payroll Control Center.
Process Models allow you to configure the typical process steps you go through and then have stop points to validate employees processed without error, posting documents were created properly, etc.
One area I've seen the process models underutilized is with regard to reporting. Many SAP reports can be added to the process model to generate the reports and push those out to analysts. Wage Type Reporter is a good example where I want to look at gross or net amount thresholds on a pay period comparison.
I worked with a company late last year and introduced process models, which they have implemented. It was a very interesting process because they threw almost every conceivable step in the process model including time evaluation, reporting, etc. and then slowly removed things until they felt they had automated what they could comfortably.
The nice thing is, you can always change the process model to included or remove tasks.
Comment From John
So if your HCM is going to SAP SuccessFactors, then you should hold off on implementing the Payroll Control Center? What is the definition of "foreseeable future"?
Many of the companies I have been talking with have Finance and the other modules moving to S/4HANA over the next couple of years.
The investment they have made to SAP HCM is still providing them their needs and moving to Success Factors may be when SAP finally cuts off maintenance. Others are going to focus on S/4HANA and then make the transition 3-4 years down the road. In these cases, assuming the technical infrastructure is something they have or were planning to invest in; I would think the case for Payroll Control Center could be made easily.
Comment From Kim
To follow up on my earlier question regarding short weeks with payroll automation, we import time files from our T&A system. Would we build in a sweep to pick up the file after it is created?
Yes, the time & attendance system would need to provide the file and then through batch jobs or the payroll process model (may require a custom program placed in the payroll process model), pull in the file and process, then you could continue with your other payroll steps.
Comment From Guest
Do you foresee pros and cons between a semi-monthly vs. biweekly payroll process, especially when the time sheet is considered?
My preference is bi-weekly over semi-monthly. It seems cleaner to me when using time sheets, but also from a processing standpoint. Semi-monthly processing varies enough that it could cause inbound and outbound interface impacts where bi-weekly should not.
The pay date calendar is also simpler because we do not have to adjust for the 15th or last day of the month falling on a weekend.
Comment From AnnaS
Hello, Mike - I am working on process models for regular payroll as I have seen how this has helped improve payroll processing at prior clients. It is a tough sell as we have multiple payroll areas some of which could be processed together in a single process both weekly and bi-weekly. I would love to consolidate payroll areas to lower the maintenance. Any suggestions on selling this to the business, as I would like to see them do this before moving to the next level of SAP SuccessFactors Employee Central Payroll. Thank you!
Yes, multiple payroll area with the same calendar is something I have seen as well. Usually, I have to find the root of the reason they were split. Most of the time I end up finding out it is just a way to make reporting easier or a way to split the workload in the payroll department.
The route then is to show how reports, authorizations, etc. can be tweaked to get the information and workload requirements met.
The other benefit is that the payroll supervisors/managers do not have to look multiple places to see the status of payroll. This would be useful with process models and, probably, even more so with the payroll control center. The payroll control center allows the distribution of items automatically based on rules or manually by the supervisor/manager.
I would start with posing the question why have multiple payroll areas when everything could be done with one? Determine the objections and then walk through how those are not an issue or are overcome.
Comment From Chris R
What are the technical prerequisites to adopting Payroll Control Center?
Enhancement Package 7 for SAP ERP 6.0
HR Renewal 2.0
SAP NetWeaver 7.4
My experience has shown many companies have not quite gotten to ECP7 or implemented HR Renewal 2.0. HR Renewal 2.0 is more than just making SAP pretty and provides additional interesting functionality.
For those of you attending the HR2017 conference in March, make sure to attend Jeremy Master's session 'HR Renewal, SAP Fiori, and self-service'
Comment From Mark
How and when should we generate reports automatically?
If you have reports that you always run during payroll processing or after, I would throw that in your batch job or payroll process model.
A few years ago, I was working with a company that ran weekly payroll on Monday. They were not ready to put in process models and liked handling most of the steps manually. However, they wanted to get a jumpstart Monday so we created a batch job to transfer CATS data, run time evaluation, release payroll, run payroll, and generate several reports with notices going to different user SAP inboxes.
They figured it saved them 3-4 hours first thing Monday morning with a benefit reducing their overtime, and letting them get home early Monday evening.
Comment From Sebastian
Which tool would you prefer in terms of implementation, customizing, and handling: Payroll Control Center or Business Process Model? Why?
I like the look and functionality of the Payroll Control Center and it is where we will all be going when moving from on-premise to SAP SuccessFactors Employee Central Payroll.
With that said, many companies haven't reached the technical requirements to put it in place and process models is where I've been able to assist companies the most with automation.
We always have to look at the individual situation and determine what benefit are we after, what costs will be incurred to make the change, and what benefit will we really gain.
Comment From Guest
Is there a hybrid solution where you can keep the payroll on-premise and for other HCM functions move to SAP SuccessFactors? Currently on ECC 6 Eh pk 0.
SAP provides and Integration add-on for SAP ERP Human Capital that facilitates the data transfer. So far, SAP has released versions 1 through 3.
Unfortunately, I do not know off the top of my head what enhancement package is required and will need to look through documents for EHP 0.
A knee-jerk reaction is that you will have some technical updating to do.
Comment From Lisa
How does Payroll Control Center improve the payroll administrator functionality?
I have found the Payroll Control Center to provide easier review of the payroll status, automation of pre-payroll processing audits, and simple distribution of items to be addressed.
SAP provides many audits that can be put in place out of the box and we have the ability to throw in custom audits. Therefore, we do not miss programs we have developed for our specific needs.
Comment From Johnny
What options are available to simplify and automate our payroll-processing day?
I view four methods or simplifying with varying degrees of automation.
1. Custom area menu - we put step-by-step tasks in an area menu the user can follow. Think of this as a checklist with little automation except for variants automatically being pulled in.
2. Batch jobs - we put in the sequence of programs and variants we want run and then schedule. Multiple batch jobs may be required if we have manual processes between programs that run.
3. Payroll process models - design our steps to run automatically with the option of having validations run prior to running the next step. Very powerful, has been available since at least R/3, and we can schedule. This is where I like to start because of the built-in validations and automation.
4. Payroll Control Center - new and requires technical requirements that companies may not have in place. Nice on the eyes, easy to assess payroll status, automated issue resolution is an option.
Comment From Teresa
Follow up on previous question for a hybrid solution, our company is implemented Employee Central Recruiting, and Recruiting Marketing within the next year, but we are keeping Payroll on-premise. We are at SAP ERP 6.0 EHP 7. How long do you think we will be able to keep Payroll on-premise before having to move to the cloud or possibly outsourcing payroll?
The last announcement I saw from SAP was 2025 end of life for ECC6. However, is was 2020 just a couple of years ago.
Much to my disappointment, payroll is not a glamorous area. :-) Once the investment is made, moving to another system is something most companies like to wait as long as possible to do. To be honest, I'm of that approach unless there is a strong business reason we have to move.
SAP still supports some R/3 customers and I wouldn't be surprised if we get a few more years past 2025 because payroll is no longer supported. Most of this depends on how many customers migrate or push back on migrating.
I want to thank everyone that attended and answered questions. Don't hesitate to contact me if a question comes up or you want to chat ideas.
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Linda Crosby of ULA (United Launch Alliance) and I will be facilitating an HR2017 Pre-Conference Workshop on this very subject 'A step-by-step guide to automate your payroll process'. We hope to see you there!
Thank you Mike for all your insightful answers and thank you to everyone who participated in the today’s chat. For more on SAP payroll, you can attend HR 2017, where there is an entire session track dedicated to it.