SAP01 Human Capital Management

May 2012

In any organization, the employees are the most vital resource, or the human capital. There are certain tasks traditionally associated with human capital management (or HCM). SAP provides a solution that effectively automates these tasks in a single, comprehensive program.

SAP ERP Human Capital Management aligns the employees’ skills, activities, and incentives with the organization’s business objectives and strategies. The basic elements of SAP ERP Human Capital Management are shown on the slide. You can see that these coincide with fundamental HCM tasks.

·        Organizational Management is the first level, followed by

·        Applicant Data gathered during the recruitment process.

·        The cyclic process goes on with Personnel Management and Development;

·        organizing training and other events,

·        and Time Management.

·        These are followed by appraisals,

·        payroll,

·        and employee cost planning;

·        whereupon you return to the beginning of the cycle.


You can use Organizational Management as a template for mapping your organization’s structure with the relevant organizational objects provided by SAP.

You can divide the structure of an organization into units that perform coherent, logical functions. Such organizational units – which can be classified generally or specifically – and their relationships comprise the organization. In general, the executive board is the superior unit over two subordinate units: human resources and finance. Human resources can be broadly divided into payroll and other services. Finance deals with the organization’s money-related transactions, which generally involve customers, creditors, and financial audits.

The Recruitment component is used to carry out the whole recruitment process, that is, from the initial data entry through to the filling vacant positions. This is applicable both to the new hires as well as the internal employees changing position. Vacancies represent staffing requirements, so vacant positions trigger the recruitment process.

When a vacancy arises, the company advertises this to attract prospective employees. The initial data provided by the applicants, as well as information obtained via interviews and tests are matched against the requirements for the vacancy. Unsuitable applicants are rejected, and those who are suitable are hired as employees.


In the SAP system, employee data are classified depending on their function, and stored as infotypes. The Organizational Assignment records basic information like the employee’s name, organizational structure, and cost center. There is an infotype for recording the employee number. Information regarding the employee’s basic salary, bonus, and pay scale level or grade is stored in the Basic Pay infotype. The Planned Working Time infotype records the employee’s working time details. The employee’s place of residence, street, house number, and so on are stored in the Address infotype. The Personal Data infotype contains personal information like marital status.


If an employee has to undergo a specific process in a company like hiring, organizational reassignment, or termination, a personnel action report has to be created. A personnel action contains data from a sequence of infotypes. The information thus entered maps a personnel process.

Suppose that an employee is being resigned in the organization. The personnel action report first needs the employee’s number, which you can retrieve from the relevant infotype. You will also need data from infotypes like Personal Data, Actions, Organizational Assignment, Basic Pay, Planned working Time, and Bank Details. All the infotypes contain a range of information unique to that particular employee.

All organizations have personnel development programs. The programs aim at upgrading existing skills of employees as well as developing new skills in them.

The Personnel Development function helps you to determine development needs by comparing working requirements of employees with their existing qualifications. You can do this by conducting employee appraisals, setting development targets, and creating development plans.

For example, you may decide that an employee who holds the position of administrator can take up a managerial position. The first step in the development program is to match the employee’s actual skills to those required by the position. Depending on the managing skills that you feel the employee requires to develop, you can plan the relevant training course. Once the employee has completed the training, she has the skills required by a head of department.

Training and Event Management focuses on activities for employees who are identified for training programs. Participants can book themselves for an event, or also prebook well ahead of schedule. SAP also allows for someone to rebook an event they have already attended, or cancel a booking if necessary. You can also replace a participant for an event if you decide that one employee has higher need for a training than the other employee. The correspondence history helps you monitor and output correspondence regarding an event, like emails or fax.


The Time Management component in the SAP system helps you to easily track and evaluate employees’ working times as well as absences. You can record an employee’s time in different ways: by direct data entry, via the time administrator, or recording terminals like swipe cards.

The time data are recorded in different time Accounts, such as attendances, absences, and substitutions. By evaluating the time data based on the respective accounts, you can make decisions regarding incentives and pay.

Time management is integrated in various modules in SAP. Hence, you can use the time data in Capacity Planning, Training and Event Management, Cost Assignment, Activity Allocation, and so on.

The Appraisal functionality in SAP supports different appraisal templates for different appraisal types.

There are various methods or forms for setting the targets for and executing appraisals. 360 degree appraisal is an overall assessment of the employee from all perspectives. It includes assessing communication skills, technical skills, presentation skills, written skills, and so on.

Personnel Appraisal is for a particular task assigned. Course Appraisal is for the particular training course the employee has attended. This is done after the completion of the course. Similarly, Surveys are performed to get the feedback on the appraisal process.

Payroll Accounting involves calculating the remuneration for each employee. An employee's remuneration comprises all payments and deductions determined for that employee during one payroll period.

To determine an employee’s payroll, you need to access the information stored in the employee’s master data and time data. The master data record, gives you basic information such as the employee’s name and number, basic pay, and bank details. From the time data, you get planned working time, attendance, leave, overtime, and so on.

After extracting all the necessary data, the payroll is calculated, generating a Remuneration Statement. Further, payroll is transferred to financial accounting and the pay disbursed to various receivers.

Personnel Cost Planning (or PCP) can be used across departments and applications. The payment information used to create personnel cost plans can be derived from basic pay, payroll results, simulated reclassifications, recurring payments and deductions, and non-recurring payments.

As shown in the slide, Personnel Cost Planning is done for employees, positions, and jobs. All these elements go through the entire Planning Process. Detailed Planning is sent to line managers so that it can be modified. Finally, plan can be released to SAP ERP FI for releasing the cost and SAP BW for further analysis. PCP is also integrated in SAP HCM components like Training and Event Management, and Compensation Management, for planning personnel costs in these components for an employee.

The SAP Employee Self-Service enables employees to create, display, and update their own HR-related data in the enterprise portal. It covers the data from various areas such as Employee Search, Personal data, Travel Management, Time Management, Benefits, Skills and Appraisals, Training, and Corporate Information. By giving your employees access to their own data, you simplify and standardize human resource processes, reduce administrative costs, and free up your HR department for strategically important tasks. Additionally, as the information is stored by employees themselves, accurate employee records can be maintained.

NOTE: this solution and method was used by EDS


The SAP Manager Self-Service is an internet-based solution that combines information and services from different systems on one interface, for example, different R/3 systems, BW system, Outlook, Web Content Manager, and so on. Within a portal, the information can be put together in a much more flexible way.

This is a collaborative function where managers can have up-to-date and accurate information about the employees who report to them and need not be physically present for the approval of any request. Hence, reporting becomes easier and faster.

MSS is also integrated with other components in SAP HCM. For Example, if MSS is integrated with Personnel Development, the manager can appraise employees and identify the training needs, if any. If MSS is integrated with Time Management, the manager can monitor employee timings and approve or reject leave requests. The SAP MSS covers several subject areas like Employee reviews, Monitoring, Reporting, and Compensation planning.