INTRODUCTION TO SAP HCM

What is SAP?

Starting from a historic point of view, SAP is an Enterprise Resource Planning Software developed by 5 ex IBM employees in Germany.  SAP stands for Systems, Applications and products in Data Processing. As the name suggests it is involved in centralised data management of all the business functions. Compared to the traditional business model, where each business function such as Sales, Finance, Procurement, Human Resource etc. maintains a separate software system, an ERP Software integrates all of them together. SAP is one among the ERP systems. Microsoft Dynamics 365, Oracle, Odoo etc. are the examples of other ERP Software.

Since 1972, SAP has developed several versions of itself. Each version was a refined, better performer than the previous one. From the first version R1 to the latest S4 HANA, SAP has come a long way to incorporate advanced technologies such as Artificial Intelligence and Machine Learning.

Fig. 1.1. SAP Version Timeline

SAP incorporates several modules, each focusing on a different business need. However, they can be broadly categorised into two categories. Modules focusing on the business functions such as Finance, Sales, Sourcing, Human Resource are known as functional modules. HCM is a functional module of SAP focusing on the human resource aspects of a business. Similarly, FI dealing with finance, SD with Sales and Distribution, MM with procurement, are all examples of functional modules. Whereas the technical modules deals with the configuration of the software, customisations, integration with other software, cloud based architecture and support etc. ABAP dealing with customisation and development, BASIS with administration of SAP are examples of technical modules

What is HCM?

HCM stands for Human Capital Management. It is involved with the business area Human Resources, designed to support and enhance processes such as hiring, training, payroll, maintenance of the attendance, leave etc. The module was initially known as SAP HR.

Fig.1.2. Modules within SAP HCM

1. Personal Administration

Personal Administration is the fundamental module within HCM, involved with managing the HR Master Data. The HR Master Data stores the comprehensive details of an employee including personal, organisational assignment, addresses, planned working time, basic pay, bank details, addresses etc. Each information is structurally stored as infotype. Infotypes are data units where similar data are stored together. Each infotype has a standard or universal code of four digits. E.g. 0002 stores personal details, 0006 stores addresses.

2. Organisation Management

At the centre of organisation management is Organisational planning. It involves setting up the department hierarchy, reporting structures, listing the job requirements, assigning the jobs to each department, assigning the employee to respective position etc.

• Organisation Unit(O): Represents departments or functional unit within the company. E.g. HR Dept, Sales Dept

• Job (C): General classification or a role template. E.g. Sales Manager, Mechanical Engineer

• Position (S): Individual Instances of the job assigned to the department. Eg: Sales Manager- Kochi

• Person (P): Employee assigned to a position

• Reporting Line: Shows who reports to whom in the hierarchy

• Relationships: Defines links between units. E.g., position belongs to job, unit contains position)

3. Time Management

Personnel Time management involves defining employee work schedules, recording and tracking the attendance and leave records, leave quota management, time evaluation where nightshift allowance and overtime are computed and integrate with payroll

4. Payroll

Computes the in-hand salary based on factors such as basic pay, time data, benefits, tax deductions etc. Payroll involves integration or coordination with banks and finance modules. Payslip generation, ensuring legal compliance, defining payroll rules and different types of wages like basic pay, HRA, deductions etc. belongs to this submodule.

5. Benefits and Compensation

Benefits such as Health Plans, Insurance, Pension plans are configured here. Third party integrations with the service providers is a key function.

6. ESS/MSS

ESS and MSS stands for Employee Self Service and Manager Self Service respectively. ESS allows employees to view and update their personal HR information independently, like leave application, address or bank details updation etc. MSS on the other hand enables managers to handle their team and related activities such as initiation of hiring or promotion requests, rection/ approval of leave requests, monitoring performance appraisals etc.

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