The SAP Payroll Roadmap

The past few years not a month goes by that people don’t ask me or talk about SAP’s roadmap for payroll. SuccessFactors had the traditional HR functions when SAP acquired it, and then they added some functionality for Time and Benefits. But not Payroll. Instead, they tailored a special version of their existing on-premise payroll to hook-up to Employee Central (EC) and called it Employee Central Payroll (ECP).

But it’s more complicated than just ECP; SAP is discontinuing maintenance for the SAP ECC on-premise HCM (including Payroll) by 2025. So if you have on-premise HCM, you need to do something fairly soon. SAP clarified some things at SuccessConnect this year so here is where we are for Payroll in SAP.

What Are My Payroll Options?

SAP’s roadmap for payroll essentially gives customers two options:

• Implement EC and EC Payroll. ECP is a payroll-focused version of the on-premise SAP HCM module that is hosted by SAP and integrated with EC. You can only use those parts of the HCM module that are there to support payroll (more about that below). There is no end-of-life maintenance announced for ECP so you are good to go for a long time. 
• Keep your on-premise SAP Payroll on the ECC platform through 2027. That’s when SAP standard maintenance ends. And then, or starting mid-2022 at the earliest, you can move almost all of the rest of the HCM modules to an S/4HANA instance and be supported through 2040. 

One of the side-effects of moving to ECP is that this version of HCM is focused on only what is needed to support payroll in a given country. So it is assumed you have a different Time Management system – like Kronos, Workforce or EC Timesheet, and a different system for Benefits. Maybe you outsource benefits or you can use EC Benefits for that. You can use time management in ECP in some cases – for some calculations in Saudi Arabia for example. You can use IT 0169 to calculate 401k in the US. There is no use of Org Management. You can create your own z-programs as much as desired, and implement BAdis, but Enhancement Implementations and Repairs are not allowed. So depending on your situation, there could be a lot of change. SAP has detailed out some of this, but for specific questions it’s best to contact your SAP rep directly. Sometimes I get different answers depending on who I talk with at SAP.

Keep in mind that if you have SAP on-premise payroll there are third-party tools that let you migrate a lot of your configuration and data to EC Payroll. But, if you aren’t pleased with how your on-premise payroll works, moving it over to ECP isn’t going to make it much better. If you take the time to take a fresh look at it and – yes – reimplement it, then you will be more pleased with the result. You don’t get something for nothing here.

There is, technically, a third option called Managed Payroll. You outsource your technical system to a certified partner and they run the system for you. In return, you also license EC and start implementing that. Customers have been able to outsource their technical landscape for years now, and this option isn’t much different from that. 

And then there is the phantom option – the true cloud, multi-tenant payroll system that SAP is supposedly developing. We haven’t heard much of anything about it lately and it’s not on any official roadmap. If it’s not on the roadmap, and a delivery date isn’t officially announced by SAP, then for me it doesn’t exist and can’t be planned on. It will come around some day – the on-premise code base for payroll won’t last forever. No software does.

But I Don’t Like Those Options!

Many SAP customers worked hard to integrate their HR, Time, Payroll and Benefits functions and they don’t want to give that up. They like their integrated processes and are disappointed that the roadmap requires them to break it all out again. And they don’t want to spend more money to change things around; maybe they have limited resources and there are 20 other projects that have better ROI. 

Based on conversations I’ve had with customers, there are other options in their roadmap for payroll. Some are considering these, and others are actively implementing them:

• Outsource all of payroll to a BPO provider. This is happening in small companies as well as large, multi-country companies. And outsource benefits, or maybe move to EC Benefits if simple enough. Most payroll BPO providers will also sell you full Time Management functionality too.
• Say good-bye to SAP maintenance and contract with a third-party maintenance provider. Run your existing SAP ECC HCM system for as long as you want, probably for less maintenance costs. But, you don't get much in the way of innovation.
• Take a good, long look at other HCM software providers who don’t have this end of life maintenance issue or enable you to keep integrated processes.

Each of these options of course has trade-offs. And some of these are right for some companies. 

So It Has Come To This

We have two roadmap options from SAP and a few others if we look outside the scope of what SAP provides. I can see how many companies don’t like any of these options, and how others are just fine. I’ve never had a payroll customer who is excited to replace their payroll – it’s hard work requiring expertise and investment, most-often for little reward other than risk reduction or increased compliance.

Every customer does have options though. Move it now with EC, move it to S/4HANA and wait to see if something better comes up later, outsource the whole thing and so on. Each choice comes with a long list of impacts too, and that is where the decisions get complicated. Let me know if you want help – it’s what I do.