While the migration to SAP S/4HANA is gaining pace, companies using SAP ECC Human Capital Management (HCM) to run HR and payroll are lagging behind. And for good reason. While SAP is totally committed to its S/4HANA and the Success Factors HCM platform, it will take up to a decade to replicate the depth of payroll functionality in this system that many customers, especially those in Local Authorities, require. With the clock ticking for the product’s end of life, what are the options for ECC customers? Don Valentine, Commercial Director, Absoft explains.
Payroll Confusion
In a world where digital transformation is driving competitive advantage, the news that tried, tested and reliable payroll software has to be changed is far from welcome – especially for those businesses with complex requirements and extensive customisation. SAP’s ECC HCM functionality is incredibly deep, providing support for hugely diverse statutory HR and payroll requirements across most of the developed world. Its time, however, is coming to an end. Companies need to move away from ECC by 2027 – or risk the increasing costs associated with the Extended Maintenance option SAP is proposing to offer up to 2030.
The benefits of and migration to S/4HANA for other parts of the business, from manufacturing to finance, are readily attainable and, in the main, on the roadmap for the majority of ECC customers. The payroll options have, in contrast, proved less than compelling. Critically, SAP’s Success Factors HCM solution for HR and payroll may have an array of HR features, including employee administration, talent management and recruitment, but it does not offer equivalent payroll functionality.
And that is a deal breaker for any organisation running complex payrolls, with multiple employment models or challenging time management rules. While SAP has taken elements of the payroll code from ECC into Success Factors, this stripped back payroll system will realistically support only smaller businesses with standard operating practices. For now. Clearly, SAP is 100% committed to Success Factors and is investing heavily in creating a truly functional payroll solution. But it will take time – possibly as long as 10 years, long after ECC has been mothballed. So, what can SAP ECC payroll customers do in the meantime?
Clear Upgrade Paths
SAP has come up with two options to support its ECC payroll customers and create a route to full S/4HANA migration. For businesses wanting to retain infrastructure ownership (in the cloud or on premise) SAP HCM for S/4HANA On Premise (H4S4) was launched at the end of 2022. It allows companies to migrate their existing ECC payroll systems, with customisations, to the SAP S/4HANA environment.
There is also a private cloud option for those businesses ready to move to a subscription model. This option involves migrating to an SAP S/4HANA Private Cloud Edition (S/4 PCE) subscription, which includes a shift to SAP’s own data centre or that of a hyperscaler such as Azure. A conversion from on-premise SAP ERP HCM licenses to PCE cloud subscriptions is required, allowing businesses to begin to explore the new HR functionality within Success Factors, if desired, while still using the familiar payroll functionality. In both cases, SAP has pledged to support the software until 2040, with full statutory updates to HCM.
The shift is a purely technical migration as there are minimal functional differences between the two platforms – however, it will still take an estimated six to nine months, depending on the level of customisation. With the deadline looming, companies need to start planning. To understand the scope of the project, SAP’s Readiness Checker is a simple tool that runs across the existing set up and will surface the requirements of the migration. Armed with this insight, companies can understand what the move will require, plan the time and resources, and schedule the implementation.
Conclusion
For companies with complex payroll needs, SAP’s provision of both on premise and private cloud payroll options is not the perfect solution for existing ECC customers, but it does provide a route to S/4HANA. It protects the existing investment in HCM, and essential customisations; it guarantees support until 2040 and gives a chance to explore the other features of the S/4HANA product suite, including Success Factors. Critically, it gives certainty in the payroll area that, to date, has appeared confusing – and that should prompt organisations to start planning now.
