Part 2: Outsourcing Payroll in an SAP Environment — Implementation and Operational Challenges

  • by Satish Badgi, HCM Consultant
  • March 16, 2008
To outsource your payroll successfully, you must evaluate operational and implementation processes. Understanding these areas prepares you to overcome challenges that may arise.
Key Concept

You can effectively manage the required inbound and outbound interfaces for outsourced payroll environments if you establish a standardized payroll environment. The success of your outsourced payroll environment largely depends on the compatibility of the interfaces and data movements between your in-house SAP HCM environment and your vendor’s payroll system.

If you have decided to outsource all or part of your payroll operations, you might wonder why you need to worry about your payroll implementation and run environment. Similar to a normal payroll implementation project, you still need to work with the outsourced vendor for requirements analysis, design, and implementation. I will discuss the implementation and operational challenges for each of the outsourcing options that I presented in part 1 of this series — check printing, tax filing, garnishments processing, gross to net, and full payroll processing. Keep in mind that the payroll vendor’s environment may be SAP or non-SAP. Therefore, the scale of complexity for the interface from your SAP Human Capital Management (HCM) system to the vendor’s payroll system can vary.

Remember that when outsourcing any aspect of payroll, except for garnishments, it is usually best to coordinate your go-live with the start of a new year. This decreases implementation challenges because you can mitigate risks around year-to-date totals related to tax cumulations. The start of a new payroll year also takes out the challenges for retroactive accounting, because people typically avoid cross-tax year retroactivity in countries such as the US and Canada. However, many payroll departments and all of the outsourcing vendors’ high-quality resources are typically very busy during the end of the year. So, you might want to go live during mid-year.

Satish Badgi

Satish Badgi has been helping clients implement SAP ERP HCM and payroll for more than 15 years. He has been involved with large full-scale SAP ERP HCM and payroll implementations using the breadth and depth of SAP modules. Satish works for a large management and systems integration consulting firm and handles global payroll for clients. He has published two books on SAP payroll, Configuring US Benefits with SAP and Practical SAP US Payroll.

See more by this author


No comments have been submitted on this article. 

Please log in to post a comment.

To learn more about subscription access to premium content, click here.