SAP HCM

SAP HCM: background, functions and future direction

As a fully-fledged, comprehensive human resources management system, SAP Human Capital Management (SAP HCM) provides all the functionalities required for personnel management. All HR topics are brought together centrally.

On this page, we answer all important questions relating to the classic SAP HR solution. We also look at the future direction of the SAP system world in the area of HR management.

Important to know: The main maintenance (Extended Maintenance) for the SAP ECC solution SAP HCM expires at the end of 2027. SAP's successor solution is the cloud-based SAP SuccessFactors Full HCM Suite (Public Cloud).

Companies currently have the option of

• either switch directly to SAP SuccessFactors HCM (Public Cloud)
• or continue to operate the classic payroll, master data and time management solutions in an SAP S/4HANA runtime environment with a HANA database (private cloud or on-premises).

By switching from SAP ERP to SAP S/4HANA, the classic solutions inherit the maintenance commitment of SAP S/4HANA until 2040.

What is SAP HCM?

SAP HCM (SAP Human Capital Management) is a human resources management system that was normally offered as part of SAP ERP and is still used by companies on SAP ECC.

As the successor to SAP HR, it contains all the functions that are relevant for personnel administration, payroll, applicant management and personnel development. SAP HCM also combines personnel management and personnel administration with multi-stage application and approval processes.

The system is also closely linked to the organizational structure, allowing hierarchy-dependent processes to be automated. Adaptation to individual company circumstances is possible with the help of the integration of numerous sub-modules. We would like to look at these in detail below.

Which modules does SAP HCM contain?

SAP HCM is an extremely comprehensive HR management system. Describing all the components of the HR solution would go beyond the scope of this wiki article. We will therefore concentrate on the most important modules, to which all sub-modules and additional functions are subordinate:

• Personnel Administration (PA)
• Personnel Time Management (PT)
• Payroll accounting (PY)
• Organizational Management (OM)
• Personnel development (talent management)
• Event Management (PE)
• Recruitment (PB)

Personnel Administration (PA)

PA, Personnel Administration, is where all the threads of Human Capital Management come together. The linchpin here is the personnel master record, which exists for every employee. This “digital personnel file” replaces paper-based procedures and ensures that all personnel data is available in an up-to-date form at all times.

In addition to general employee master data such as personnel number, name and address, information such as organizational unit (department), pay scale and pay scale group is stored. Each of these entries is assigned a validity period, creating a history over time.

This chronological assignment ensures a high level of transparency and traceability of changes. Overall, SAP HCM significantly relieves the HR department of administrative tasks, freeing up time for more strategically important tasks such as recruiting and personnel development.

An important personnel administration sub-module that is therefore worth mentioning is “Personnel Cost Planning and Simulation (PA-CP)”. Based on personnel master data, payroll results and other data sources, PA-CP enables transparent and systematic personnel cost planning.

In addition, various scenarios such as salary adjustments or staff additions and departures can be simulated. Restructuring of the organization can also be taken into account in the planning. Furthermore, the planning results can be transferred directly to Controlling (CO) as a basis for financial planning.

Personnel time management (PT)

Personnel time recording is now mandatory in almost all industries. In practice, this is done either by employees maintaining their own working times or via time recording terminals. In addition, many companies have time administrators who make manual entries or corrections. All three approaches are supported by SAP HCM PT.

In order to achieve the highest possible degree of automation, time recording via terminals or comparable technologies is recommended. The time bookings are immediately transferred to the SAP system via interfaces, where they form the basis for subsequent processes such as payroll accounting.

Outside of the business premises, browser-based time recording in self-service is conceivable. SAP also offers this option. SAP HCM also supports classic time management workflows, such as requests for flexitime, supplements and corrections.

Payroll accounting (PY)

The third important task of personnel administration is payroll accounting. All relevant information is available in SAP HCM. This applies to master data such as salary groups as well as working times, various absence times, flexible salary components and special payments. Thanks to regular updates, payroll accounting always complies with legal requirements.

Additional security is provided by simulation runs that can be carried out before the actual payroll run. This allows any errors to be corrected in advance. SAP HCM PY also supports different payroll periods. This is particularly useful for international companies.

Organizational Management (OM)

In the SAP HCM environment, Organizational Management is used to map the entire company structure with its organizational units. The module also supports the analysis of the process organization and personnel analyses for personnel planning. If organizational changes are imminent, they can be planned with the help of SAP HCM OM. Last but not least, this module forms the basis for functions such as career planning and applicant management.

Personnel development (talent management)

The main task of talent management in SAP HCM is to match vacant and open positions with the available personnel resources. This is done on the basis of defined criteria such as qualifications and personal interests. At the same time, these functionalities allow individual career and development plans for employees, including the associated target agreements, to be mapped in the system.

It should also be mentioned that talent management comprises further sub-modules. These include Performance Management (PEM) and Learning Solution (LSO).

Training and Event Management (PE)

Training and Event Management in SAP HCM is closely linked to personnel development. It supports the planning, implementation and evaluation of events such as training and further education. A complete event catalog including lecturers, rooms and documents can be stored in the system. Existing events can be used as templates and scheduled on a recurring basis. It is also possible to accept registrations.

At the end of the event, SAP HCM PE supports cost center assignment and invoicing. Another helpful feature is a function that allows qualifications achieved to be transferred directly to the personnel master data. This means that a training history is automatically generated for each employee if required.

Recruitment (PB)

The HCM Recruitment module supports companies in managing vacancies. The transfer of job requirements and job descriptions to online platforms is also possible with PB. Numerous functions such as scheduling interviews or application deadlines can be created automatically and tracked in a clear manner. The entire recruitment process can be mapped individually.

Separate master data management is available for candidates. This not only allows you to build up an applicant pool that can be accessed as required. If a candidate is hired, the applicant master data can be transferred extremely easily to the newly created personnel master data.

Other SAP HCM sub-modules

As mentioned at the beginning, the main modules mentioned above contain several sub-modules that can be used to map specific tasks in the HR environment. The following modules should be mentioned in particular:

• ESS/MSS: Employee Self Services/Manager Self Services
• Structural (dynamic) authorization assignment
• Personnel appraisals

ESS and MSS relieve the HR department massively by digitizing workflows. For example, it is possible for employees to initiate processes such as working time corrections, travel requests or training bookings in the system themselves. Access points can be the SAP Netweaver Business Client or the Fiori Launchpad, for example. Fiori applications can even be used on mobile devices.

Structural authorizations, which can be used in conjunction with organizational management (OM), also ensure security and efficiency. In contrast to the standard SAP role and authorization concept, authorizations are not assigned statically but dynamically.

The functional principle: authorizations are assigned to positions within the organization. If an employee takes up this position, he or she automatically receives the appropriate authorizations. This is a clear advantage in terms of IT security.

SAP HCM also makes it possible to map employee appraisals. The data stored in the system in turn forms the basis for salary adjustments, variable salary components or bonuses. However, the assessments can also be used in conjunction with event management to ensure the quality assurance of further training events.

What advantages does SAP HCM offer companies' HR departments?

If you look at the tasks of HR departments today, they are still predominantly of an administrative nature. Paper-based personnel files are kept, vacation requests are processed on paper and even working hours are recorded manually. However, in times of a shortage of skilled workers and limited personnel resources, it would be much more important to focus on the strategic objectives of personnel management.

SAP HCM offers important support in two respects. On the one hand, it enables the optimization and digitalization of HR processes, and on the other, it contains numerous tools that are important from a strategic HR perspective.

The simplification and streamlining of administrative processes is achieved through the following HCM features, among others:

• Digital leave request (e.g. via web browser) incl. approval workflow
• Central, system-supported maintenance of all relevant HR master data
• Consistent data records and traceable changes (history)
• Complete data transparency
• Partial automation of payroll accounting
• Simplified time recording (corrections also possible in self-service)
• Integration into other SAP modules such as FI/CO

Strategic components of the system include:

• Tools for effective and individual employee development
• Comprehensive talent management
• Support for modern recruiting channels
• Support for onboarding processes (induction)

SAP HCM vs. SAP SuccessFactors HCM

As far as the HR sector is concerned, the successor to SAP HCM is already available.

It is the SAP SuccessFactors Full HCM Suite, a solution with new code lines that is available via the public cloud. The name SAP HXM for SAP HCM, which was used for some time, will no longer be used.

Companies that are currently still running the SAP ECC solution SAP HCM can choose between two (or three) ways to deal with the impending end of extended maintenance for SAP HCM on December 31, 2027:

• Either switch directly and completely to SAP SuccessFactors HCM,
• use SAP HCM under SAP S/4HANA with HANA database (maintenance commitment until 2040 by using SAP S/4HANA) or
• rely on a hybrid model of SAP HCM with SAP S/4HANA and SAP Success Factors HCM (for example, from SF Employee Central as the master data system and SAP Payroll and SAP Time Management from SAP HCM for SAP S/4HANA).

SuccessFactors was originally an independent US company that offered a cloud-based talent management suite with functions for analyses and collaboration. SAP acquired the company in 2011 and has since massively expanded its range of functions.

SuccessFactors is now a complete HCM solution from the cloud. It includes all the functions from classic SAP HCM. However, some additional, innovative features are also available. These include:

• SF Employee Central as the heart of the HCM suite (strategic HR): responsible for master data management and for mapping personnel administration, organizational management, absences and payroll (optional)
• (E-)Recruiting: supports a collaborative, objective and mobile selection process
• Onboarding: configurable onboarding process that involves new employees, hiring managers and an onboarding buddy
• Compensation: maps all compensation processes; the central element is a compensation profile including salary history and positioning
• Performance & Goals: manages target agreements and monitoring of target achievement for performance evaluation
• Learning: learning platform that is linked to numerous other modules (e.g. Goal Management and Onboarding); can be used on mobile devices
• Succession and Development: controls and automates succession planning activities
• SAP JAM: communication and collaboration platform for employees, similar to a social network
• Analytics: enables the creation of reports for all SuccessFactors modules

As in other areas, SAP is clearly moving towards the cloud and is focusing on the innovative SAP SuccessFactors HCM solution in the public cloud in the HR area.

SAP HCM under SAP S/4HANA

Companies that want to continue using SAP HCM can do so today under SAP S/4HANA. According to SAP, this is not the “innovative way” (as the code lines do not change), but it is an option for anyone who does not yet want to or cannot switch to SAP SuccessFactors HCM.

Hybrid operation (i.e. a combination of both solutions and further gradual conversion to SAP SuccessFactors HCM) is also an option that is suitable for companies.

This means that part of the HCM system landscape is mapped from SAP ERP HCM (on-premise or private cloud) to SAP SuccessFactors HCM (public cloud) using a hybrid model.

• This can mean, for example, that a company uses SuccessFactors Employee Central in the public cloud, but also operates SAP Payroll and SAP Time Management with SAP HCM SAP under S/4HANA.
• Another company uses SuccessFactors Employee Central and SF Time Tracking, for example, and only runs SAP Payroll under SAP HCM.

Conclusion: SAP HR products ensure future-proofing

The challenges in HR management are now many and varied.

• One of the most pressing problems of our time is the shortage of skilled workers. Not every company is able to quickly fill vacant positions with suitable candidates.
• In addition, employees in the areas of payroll accounting and administration still spend too much time on routine activities.
• Reporting is also in need of optimization in many places, which means that HR strategies are not always based on sound figures.
• Last but not least, employee collaboration offers scope for improvement.

All of these challenges can be met with SAP HCM - and in particular with the cloud-based successor solution SAP SuccessFactors HCM.

SAP's HR products enable the digitalization and automation of HR processes, intelligent recruiting and talent management as well as better collaboration thanks to social and mobile ERP. Flexible reports and forecasts can also be generated under the “Analytics” banner, which can significantly optimize strategic decisions in HR.