Considerations for an SAP payroll implementation or migration

In our previous paper we introduced the challenges in the domain of HR and payroll. In this paper we continue with SAP as one of the vendors that provides tools for HR and payroll to support the respective processes. SAP provides flexible, modular enterprise software that is designed to support changing business needs. SAP S4 HANA (ERP) as well as SAP SuccessFactors and Employee Central Payroll (human capital management solutions) can support core HR activities (e.g., managing organisational structures, absences and benefits), time and attendance, talent management, digital workspaces, analytics and reporting and, of course, payroll.

SAP continues to innovate as the business environment changes and technology evolves. However, each organisation is different, and must consider many factors that determine which payroll solution is most desirable or feasible. Compatibility with established enterprise systems is often a major consideration, while the location or control of data and hardware may be important factors for organisations subject to particular privacy, security or regulatory requirements. SAP’s three payroll offerings help ensure that each organisation can find the best fit.

SAP ERP HCM Payroll On-Premise

HCM Payroll On-Premise is the current solution, which runs out of maintenance by 2027. In case your company still operates HR and payroll on the old premise solution you will need to take action prior to 2027. SAP provides 3 possibilities for their existing customers

1. Move HR and Payroll Operations to SAP SuccessFactors and Employee Central Payroll: This is the most sustainable solution in the long term. SAP honours a cloud first strategy and this is the solution where most efforts are put in regarding innovations and new functionality. More details will be explained in the next paragraph of this article.
2. Move HR and Payroll Operations to S4 HANA: This is an alternative offered to clients which are not yet ready to move to the cloud and manage the change which comes with SAP SuccessFactors. More details will be explained in the last paragraph of this article
3. Buy extended maintenance for your SAP on premise installation until maximum 2030: This is the non preferred solution as it will bring an increase in operational costs whilst not providing any innovations and will just postpone the decision for either of the previous 2 options with a maximum of 3 years.
   

SAP SuccessFactors Employee Central Payroll

As mentioned in the previous paragraph SuccessFactors is a complete, cloud-based HCM suite. It offers next-generation agility, speed and features and comes with a native integration with the Employee Central Payroll as well as modules for other HR activities. It can be a standalone solution for HR but can also be leveraged as the Global source of truth if it comes to HR data integrating it with for example your ERP system (it has standard connectors with S4 HANA as well).

One of the benefits of ECP as a cloud product is that it comes with a lower total cost of ownership, from reduced infrastructure and maintenance costs. It can also scale easily, and adapt to the complexities of a diverse, dispersed and changing workforce. The entire SuccessFactors suite includes robust security and privacy protection, to ensure that sensitive data held in the cloud remains private .

EC Payroll integrates with Core HR functionality in SuccessFactors Employee Central, to synchronise HR and payroll data, minimise manual data entry and reduce errors. ECP’s real-time payroll processing enables fast, frequent and flexible payroll cycles, without the limitations of scheduled batch processing. Payroll staff are thus freed up to focus on more value-adding activities, enabling organisations to respond and adapt to the demands of a changing workforce and business environment. For that matter this is the preferred solution for clients to manage their HR and payroll processes. When it comes to organisations currently running their payroll (and HR) processes on an on premise installation this solution requires a full HR Transformation program, implementing a different way of working. This might be a change where the organisation is not (yet) ready for or does not have the budget allocated for. In that case moving payroll and HR to an S4 installation could be an alternative to consider.

SAP S/4HANA HCM Payroll Private Cloud Edition (PCE)

This solution delivers similar HCM Payroll functionality to the on-premise solution, but through S/4HANA running in a privately-managed cloud , to combine security, control and flexibility. It offers organisations with an on premise installation an extended transition path to the cloud, while retaining the benefits of, and investment in, an existing SAP ERP implementation. It also provides a useful entry point for organisations wishing to adopt SAP technology, by deploying SAP S/4HANA to support many standard business processes in an easy, integrated and controlled manner.

By running in a private cloud, this S/4HANA solution enables each customer to retain control over its data and technology infrastructure, which is critical for sensitive payroll data. PCE thus allows customers to manage their data centre strategies to comply with both corporate policies and local regulations. Existing SAP customers can also retain and extend the custom code, configurations and processes that have been developed to meet their specific payroll and statutory requirements. Similarly, the adoption of upgrades and innovations can be scheduled by the organisation to minimise disruption and ensure continuity of its payroll operations until 2040.

The solution also supports a hybrid deployment, allowing some processes to remain on-premise, while others are migrated to cloud services. Customers can therefore manage the transition from an on-premise to a cloud-based solution at a pace that suits their business aims and priorities.
The following table will give a brief overview of the considerations towards your SAP roadmap.

In case you are currently exploring the best option for your organisation reach-out to Guus Brouwers (gbrouwers@deloitte.nl and/or Gert-Jan Koops (gkoops@deloitte.nl) to make use of our Payroll Lab where we will deep dive on the specifics of your organisation and how to relate to the technical possibilities.

SAP HCM and Payroll considerations at a glance

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