Integrating SAP Payroll with Accounting (FI/CO) and Benefits

Thank you for registering for this live Q&A on automating and integrating SAP Payroll with finance (FI/CO) and benefits. Please find the transcript below.

Sue Dainis: Hello and welcome to today’s live Q&A, “Integrating SAP Payroll with Accounting (FI/CO) and Benefits.” We’re looking forward to a lively discussion. Thanks to everyone who has submitted their questions in advance.

We’re joined for today’s event by Mike Timm with Integrated Consulting Group. Mike is a frequent speaker at SAPinsider events and will be presenting on this topic at the upcoming HR event taking place March 2019 in Las Vegas.

Mike, thanks so much for taking the time out of your busy schedules to be here. I’ll turn things over to you to start taking questions.

Mike Timm: Thank you, Susan, for having me today. I’m looking forward to discussing integration between accounting and benefits. I hope all of you find some good information during the Q&A and are ready to ask questions.

Comment From Adam: How can I reverse postings between payroll and accounting?

Mike Timm:

The simplest method is to execute transaction code PCP0. In the screen that appears check the posting to be reversed and then follow menu path Edit > Reversal > Reverse documents.

Another option is to access program RPCIPR00 where you can enter the Run type and Run number if you already know which posting to reverse.

Comment From Ben D: In our environment, we are keeping SAP ERP HCM on SAP ERP Central Component (SAP ECC), but we are moving Finance and the rest of the modules to SAP S/4HANA. We have separate systems already. Have you seen much of an impact during this type of transition?

Mike Timm: My experience has been that there are two main considerations when an organization is moving everything except SAP ERP HCM to SAP S/4HANA:

1. If you are not in a separate system now, the transfer of data changes. You’ll need to gain an understanding of Application Link Enabling (ALE). If you are in separate systems, this piece becomes almost as simple as changing a pointer.

2. Most companies moving to SAP S/4HANA review and modify their general ledger (G/L) structure and potentially their cost element structures. It seems too common for there to be failing to realize how this impacts payroll and the effort needed by payroll to make updates.

Comment From Karen McDougall: What is the best program to use to display the full G/L mapping for Wage Types?

Mike Timm: Executing transaction code PC00_M99_DKON (Wage Type Assignment – Display G/L Accounts) will take you from the wage type to the G/L account and display groupings you may have.

Comment From Jacob: Do you see a decent return on investment (ROI) when implementing third-party remittance? If we want to start simple, what would you do?

Mike Timm: If you aren’t using third-party remittance at all right now, you’ll find almost immediate ROI by starting with garnishments. The configuration component typically doesn’t take very long, and the data can begin flowing to Accounts Payable (AP) instead of manual keying. You’ll also have more visibility in the garnishment Infotypes about the status of processing because of the links SAP already has built in to the system.

As an example, a company I worked with a few years ago with a few thousand employees took less than a week to configure and test third-party remittance for garnishments, and it reduced the payroll and AP department labor by one day each week. The ROI was five days of effort, saving 52 days a year. All your remittances will not be that quick depending on the size of the organization, but I’ve only seen significant time saving.

If you don’t outsource taxes, that would probably be the second area that can provide a good ROI.

Outsourcing benefits or taxes changes the dynamic, and my experience has shown that there is less impact on the overall process because those vendors send you an invoice based on the interface files.

Comment From Rajesh: What’s required to process benefits in conjunction with payroll?

Mike Timm: SAP provides the configuration steps through the IMG. Most effort when implementing or changing benefits is good communication between the Benefits, Payroll, and Accounting teams.

From a payroll perspective, you should look into whether there are special limits that are necessary, new wage types needed, a priority of deductions, or when in the payroll period the benefit master data should be considered.

Having all these pieces outlined in detail will make a much better process.

Comment From Kathie: What is the best method for reversing individual payroll cluster postings that were contained in a prior posting run that included many other employees who do not have reversals?

Mike Timm: Typically, a posting to accounting reversal is something we want to do only in an emergency, and it is an all-or-nothing activity. For example, wage types weren’t mapped correctly, and they were missed during testing. There isn’t a simple or good method to be selective with the posting to accounting reversal.

Comment From Prem Kesavan: Thanks, Mike, for the comments on garnishment (third-party setup) and ROI. Do you think it is worth doing garnishments internally, without outsourcing, given that SAP rules are not 100% compliant?

Mike Timm: Regardless of whether you outsource or process garnishment internally, you’ll need to update the garnishment configuration to meet the originator’s requirements.

The outsourcers many times will assist with the requirements by providing feedback based on data they see coming through interface files. The benefit here is that the outsourcer is interpreting the garnishment and analyzing whether the payroll system appears to be correctly calculating.

If you process garnishments internally, your garnishment team will have the burden of validating garnishment calculations and providing information to payroll about necessary garnishment calculation updates.

For those of you who get BSI email regarding tax update bulletins (TUBs), BSI also provides garnishment change information.

Comment From Dr. Praveen Gorrela: What are the generic integration points between EC Payroll with SAP S/4HANA FI?

Mike Timm: SAP provides the standard integration points for EC Payroll to SAP S/4HANA. If you are familiar with on-premise payroll interfacing with a different on-premise SAP ECC or SAP S/4HANA system, EC Payroll will follow a very similar approach.

Comment From Prem Kesavan: Hi, Kathie. You can also leverage the “off-cycle” payroll posting reversal at the employee level. This step will ensure that you reverse only that particular employee posting.

Comment From Brandon: We outsource our benefits. Should we use third-party remittance?

Mike Timm: Most of the time the benefit outsourcer will be sending an invoice based on the interface file you sent them. Reconciliation between payroll and the invoice can then be done.

Introducing third-party remittance for benefits becomes less advantageous. Now you’ll have to reconcile Payroll,  AP, and the outsourcer. Even though Payroll and AP should have the same amounts, a breakdown in the integration for some reason can make reconciling all three more labor intensive.

Comment From: What is your recommendation for managing benefits for retirees in an SAP system?

Mike Timm: Really, it comes down to cost. Can you provide a better service that is less expensive than using an outsourcer?

Retirees are typically a more stable group where you don’t have significant changes in policy from year to year. Stable processes are easily handled by outsourcers without you getting nickeled and dimed for exceptions. This makes it much more enticing.

However, if your company values and culture want a special touch, managing retirees’ benefits internally may be the best option.

Comment From Lorraine: We have an issue where we have to delimit Infotype 169 savings plans based on the first day of the period instead of on January 1 as we would like. Where in configuration should we look?

Mike Timm: I would start by looking at schema UBE2 (or your equivalent) and see what Parameter 1 value is assigned to Function P0169. Most likely you’ll want CHK.

Comment From Dr. Praveen Gorrela: Could you provide an overview on Wage Type assignment for a fixed cost center during posting to finance?

Mike Timm: Are you looking for specific wage type(s) to always post to a fixed cost center instead of the cost center found in an Infotype?

Comment From Chas: What is the best method to post only taxes to a specific cost object within FI, while keeping the other postings to the cost center listed on Infotype 0001?

Mike Timm: You have me intrigued why accounting would want all taxes to hit a specific cost center instead of being allocated out based on employee cost center.

I would need to explore the reasoning more, but my first inclination is to look at custom options in the code and potential Z tables. It really depends on the complexity of logic.

Comment From Frederick: What is the advantage of using benefits Infotypes (for example, 0167 or 0168) versus a deduction in Infotype 14?

Mike Timm: To me this mostly depends on whether you outsource or not. If you don’t outsource, using the Benefit Infotypes makes the most sense.

If you do outsource, Infotype 14 will reduce your efforts because you don’t need to perform all the benefits configuration. You can also use limits on deductions to handle most limits.

HSA and Savings plans will be better served going through the Benefits Infotypes because of the program logic SAP provides.

Comment From Krishna Pinisetty: Thanks for your suggestion regarding retiree benefits. One more question. Consider a scenario in which a benefits vendor needs spouses of retirees as different subscribers (not as a dependent) to individual plans. I think the solution is to hire spouses of retirees as NonEmployee is the option to enroll them as separate subscribers. Is this the correct approach, or is there a better alternative solution?

Mike Timm: Yes, keeping spouses or other beneficiaries separate is a good way to go. You can link the retiree to a spouse/beneficiary to keep track of the moving pieces.

Comment From Krishna Pinisetty: Yes, we are planning to use IT0021 Ref Pers No field to link retiree to a spouse/beneficiary. Thank you.

Comment From Chas: We are looking to simplify our cost flow strategy within FI, and one option is to use more Activity Types, Allocations, and Costing Sheets. This approach would reduce the need of revaluation during FI month-end closeout. To assist with this process, we want taxes to post to specific internal orders based on company. Can you offer any advice?

Mike Timm: Unless I’m not thinking of something, I think you’ll have to go down the custom route and complete these two steps:

1. Enhance the posting to accounting

2. Allocate costs during the payroll process so that the cluster has the necessary pointers

Comment From Ravi. K: Hi. We are implementing EC Payroll for a client who is moving from on-premise payroll. The client has been using the RPCIPE00_OLD program, which fills the cost centers to the balance- sheet line items in posting. We need to use the new program RPCIPE00 in EC Payroll, which clears the cost assignments to the balance-sheet items. However, the client is not on the SAP General Ledger (new G/L) functionality in Finance and moving to the SAP General Ledger is not on its road map in the near future. As such, we cannot use the ‘Distribution of Liabilities’ functionality in Payroll to achieve the cost assignments. The client wants cost centers for payables items. Any suggestions on how we can achieve this?

Mike Timm: Unfortunately, I don’t have the answer for this one. You’ll need to put in a request to SAP.

Comment From Sanam: With SAP ERP HCM not being part of SAP S/4HANA, how does the integration to FI work in terms of on-premise Payroll being linked with SAP HANA Enterprise Cloud?

Mike Timm: Standard SAP integration should be possible between SAP S/4HANA and on-premise Payroll whether the data is on SAP HANA Enterprise Cloud or not. This process involves ALE and IDoc processing.

Comment From Ravi. K: The Benefit Focus does not pro-rate the deductions for mid pay period hires, terminations, life event changes, etc. Is this functionality supposed to be handled in EC Payroll via a schema/rule? If yes, can you suggest the best payroll functions to handle these proration for deductions integrated to Infotype 0014?

Mike Timm: You can set the wage type up to prorate based on the start and end date through configuration.

Sue Dainis: Hi, everyone, that wraps up our time for today’s live Q&A. Thanks to everyone who participated for your great questions.

To learn more on this topic and many more, join us this March in Las Vegas. Find out more and register here: https://bit.ly/2RG3Jm0.

Mike, thanks again for joining us today for a great chat.

Mike Timm: I hope that you’ll be able to join us in March at the SAP ERP HCM Summit. The event will cover many areas of on-premise HR processes, and there will be plenty of pointers for those of you looking to move to Employee Central and Employee Central Payroll.

I’m especially excited about the pre-conference workshop I’m co-presenting with Imran Sajid, “A step-by-step guide to automate your payroll process” where we will cover the Payroll Control Center in great detail.