Many customers today question if a move to the cloud from in-house payroll would be a worthy investment. SAP offers a few options in this arena, whether you already run SAP On Premise payroll, you outsource currently, or you recently implemented Employee Central, we will discuss the advantages and disadvantages of each to help you better decide.
With SuccessFactors Employee Central, SAP offers a few approaches in delivering the payroll framework:
1. Continue using SAP On Premise Payroll (Your staff members execute all payroll functions and backend processes.)
2. Use the functionality of SAP EC payroll (Some infrastructure and costs can be eliminated.)
3. Continue to integrate with hosted payroll solutions (for example, Ceridian, ADP, etc.)
There are pros and cons to each; let’s review some of these key considerations.
So why integrate EC with your existing SAP On-Premise Payroll?
The On-Premise SAP Payroll solution is a proven payroll solution (supporting more than 60+ country versions). This solution makes a lot of sense if you’re already live on it and when stability and flexibly are key. SuccessFactors decided to reutilize the SAP Payroll Engine to offer a complete cloud solution; a total rebuild would have cost an extreme amount of time and effort when they already had a proven solution. Below are some specific points to consider:
1. You operate and process SAP Payroll in a non-supported EC Payroll country (SAP lists 41)
- Where do you sit in terms of your roadmap?
- Where do you see yourself going in the global market, acquisitions, line of business, etc.?
2. If your payroll is highly customized to meet key business requirements, the standard EC Payroll out-of-the-box solution won’t be ideal.
3. Your payroll is heavily integrated with SAP Time Management and evaluation, includes complex rules within the collective agreements, or you have external time systems integrated as part of your SAP Time on premise solution. Those processes will need to be reevaluated when considering EC Payroll for ease of integration.
EC Payroll is a hosted system provided by SAP to Cloud customers who possibly have never had HR or Payroll in house or a larger customer base with an ECC background; the incentive is to integrate HR and Payroll On-Premise with EC and leverage SAP’s latest offerings in moving the cloud.
The following chart summarizes core differences:
|EC with SAP On Premise||EC with SAP EC Payroll|
|Client owns SAP license for ERP and hosts/runs payroll themselves or through a third party||Payroll is hosted by SAP|
|BASIS and security infrastructure required to apply the latest updates, support packs, tax updates, etc.||Legislated changes, tax updates, system updates, HRSPs (support packs) are all performed and maintained by SAP. Always on the latest functionality|
|In-house staff required for testing, test scripts, validation, and signoff||Minimize resources for testing during updates, upgrades|
|Customization/development for any unique/mandated business requirement||Minimal customization/development|
|Interfaces and backend processes maintained and supported by client/customer||Interfaces and backend process developed in conjunction with SAP by client (shared responsibility)|
|Payroll runs efficiently and does not require any process reengineering||Leverage the full capabilities and innovations of EC|
Replication of master data from the cloud (EC) to On Premise is supported with different middleware components.
Payroll data is migrated to the EC Payroll system or the On Premise environment by different offerings such as Dell BOOMI or SAP Cloud Platform Integration (SCPI), formerly HANA Cloud Integration (HCI). Then, the system that you choose replicates the master data via iflows.
The middleware components will query master data over a spanned period for master data relevant changes. The frequency of this poll is configurable to your schedule requirement.
Adding direct updates to master data records in the SAP ECC environment risks reversal entries during the replication process. For example, an addition of a recurring payment directly will pay the employee accordingly until the next replication. An entry from EC will remove the entry and in turn reverse payroll entries deducting the employee. It is imperative one system of record is maintained for master data.
In addition, key fields may be treated differently in SuccessFactors EC versus ECC. For example, in the case of a recurring payment or deduction, the payment model field is typically maintained to assign the payment schedule. In EC, other fields are utilized for the start date and frequency. These fields replicate to other field values in ECC that in most cases are hidden.
During the cycle of payroll testing, replication should be turned on so the full end-to-end scripts/scenarios are tested in conjunction with the payroll calculation. In many cases, data is loaded directly during testing cycles. This is helpful in case the test environment has no connectivity or technical limitations prevent replication. Consecutive payroll cycles should be performed with the appropriate iflows and integration activated.
Payroll Control Record
If payroll is in process, that is, the payroll area is locked from master data updates, the replication monitor will track and log the employees in error. These can be replicated down when releasing the control record during the regular payroll cycle.
All errored employees can be selected for replication during this cycle. Anyone running the standard SAP On-Premise Payroll has experienced that updates cannot be performed in the past or in the current period while payroll is in process. With EC, this concept goes away because EC updates are allowed continuously. This is a great advantage for data maintenance, such as with employee life-cycle changes or salary changes, if your payroll cycle is a few days.
Transaction SLG1 – Application Log for Troubleshooting and Error Monitoring
Errors may include employees locked, field values not updated successfully, possible configuration entries missing, etc.
Improved User Experience
With the Payroll Control Center/“Payroll cockpit” SAPUI5, screens were introduced with HR Renewal 2.0 and the same user interface is used for EC Payroll.
The user interface (UI) allows the payroll processor to distribute payroll errors, logs, monitoring, and audit reports to key users. This topic could surely take a further deep dive, but to summarize, the typical payroll processes can be executed and tailored for each organization (much like how one would configure a payroll process model). Traditional SAP GUI transactions, such as releasing the control record, have been replaced and automated as part of the “repeat” cycle of payroll.
Note, in many cases the original ECC reports are called and have not been reformatted. For example, with the payroll log or payroll journal, the main advantage is the distribution of the payroll processes, auditing, and staff monitoring.
This is a lengthy subject and I did not cover everything. If you have any questions, please feel free to reach out to me at firstname.lastname@example.org.
For further information, you can review the SAP guides and Product pages below:
As an SAP HCM consultant specializing in North American payroll, I work with end users, client managers, project managers, technical architects and developers; it’s so imperative to understand and be relatable to different priorities, agendas and personalities.
Based in Toronto, Canada I started over 19 years ago working in SAP Payroll, in more of a technical role that expanded to a lead role mentoring other consultants and client team members.I broadened my knowledge in working in the US for over 10 years specializing in US payroll solutions, integration and the legislative areas of US payroll. Large global projects have also given me the great opportunity to work in South America and across Europe. In doing so, I’ve learned how cultural system requirements vary by degree and, in general, how users react and use their toolsets differently.
Soumen Karmakar holds a B.A. majoring in Business and Computer studies, courses at University of Toronto and Waterloo in addition numerous SAP HCM related courses.