Structures in SAP HR

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Structures in SAP HRWelcome to the tutorial on Structures in SAP HR. The purpose of this tutorial is to explain the two main structures in Personnel Administration – the Enterprise Structure and the Personnel Structure. The need to prudently design these structures cannot be overstated. Although these structures are configured in Personnel Administration, they directly control features across the gamut of Human Capital Management in areas like Payroll, Time Management and Appraisals. This tutorial is part of our free SAP HCM course.

Just a heads-up that there are no SAP screenshots in this tutorial. We’ve deliberately left these out as this tutorial focuses on the conceptualization of these structures on paper, rather than their configuration in SAP. Once the structures have been designed, their configuration is relatively straightforward and will be covered in a separate tutorial.

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Structures in SAP HR: Enterprise Structure

The design of the SAP HCM enterprise structure is perhaps one of the most crucial steps in any HCM implementation. It is a hierarchical structure as shown below.

SAP HCM Enterprise Structure
SAP HCM Enterprise Structure

It consists of these elements:

Client

This is a technical feature of an SAP system. It is represented by a three-character alpha-numeric code. We won’t get into a detailed explanation of this element since it has more technical rather than functional relevance.

Company Code

SAP company code is the highest level of the SAP HCM enterprise structure within a client. This element represents the smallest unit for which a complete accounting can be mapped. Although defined in Financial Accounting, the company code is a prerequisite for the implementation of Personnel Administration. It is created as a four-character alphanumeric code. Its functions are as follows:

  • Used as a selection criterion for reports
  • Used as a field for authorization checks
  • Serves as a basis for the generation of default values for infotype fields

Personnel Area

This entity is defined in Personnel Administration and is a subdivision of the Company Code. Each Personnel area must be assigned one Company code. It is created as a four-character alphanumeric code. Like the Company code, its functions are as follows:

  • Used as a selection criterion for reports
  • Used as a field for authorization checks
  • Serves as a basis for the generation of default values for infotype fields

Personnel Subarea

This entity is created in Personnel Administration and is a subdivision of a Personnel area. It is created as a four-character alphanumeric code. This is one of the most important elements in HCM as most of the HR regulations are differentiated at this level. The personnel subarea has the following functions:

  • Determines the permissibility of wage types
  • Determines groupings for Payroll
  • Determines groupings for Time Management (e.g., work schedules and absence types)
  • Determines the Holiday Calendar
  • Used as a selection criterion for reports
  • Used as a field for authorization checks
  • Serves as a basis for the generation of default values for Infotype fields

An Example

Let’s understand how to design SAP HCM Enterprise structure with the help of a simple case. Consider a Company, say Company 1, which comprises of:

  1. A Corporate Office in Location 1
  2. A Branch Office in Location 2
  3. A Sales office in Location 3
  4. A Branch office also in Location 3
  5. A Sales office in Location 4

How do we go about defining the enterprise structure?

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Prima facie, we have two options as shown in the figures below. In each figure, the top level depicts the Company code, the second, the Personnel Areas and the lowest level, the Personnel subareas.

SAP HCM Enterprise Structure Example - Option A
SAP HCM Enterprise Structure Example – Option A
SAP HCM Enterprise Structure Example - Option B
SAP HCM Enterprise Structure Example – Option B

So, as a consultant, would you recommend Option A or Option B?

To be able to arrive at an optimal design, let’s go back to the main functions of a Personnel Subarea. We know that all groupings as well as HR regulations are controlled at Personnel Subarea level. Hence, the main question to be asked to the client is this – At what level are the HR regulations controlled and policies differentiated? Is it at location level? If yes, Option A (locations as Personnel Subareas) should be recommended. On the other hand, if the type of Office (Corporate /Sales/Branch) determines the policies, then Option B should be suggested.

Assume that the client’s HR policies are location-dependent. For example, if Location 1 and Location 2 have the same wage types but different Holiday calendars, then we know that Location 1 and Location 2 must be different subareas. These two subareas can then be assigned two separate holiday calendars. These subareas can also be assigned the same grouping for wage types, so that the wage types permissible for that grouping, consequently, are permissible for both subareas.

Hence in this scenario, the correct recommendation would be Option A.

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Taking our example forward, assume that the Branch office in Location 3 is physically spread across two buildings, say Building 1 and Building 2, which are at a distance from each other. Now should Building 1 and Building 2 each be represented as a Personnel Subarea? To answer this, we need to ask the client a few more questions:

Are there are any differences in HR policies between these two buildings?

Should any reporting be done using Building as a selection criterion?

Should any infotype field values be defaulted based on the Building?

Are any authorization checks based on the Building?

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If the answer to any of the above questions is yes, then each Building should be represented as a Personnel subarea. Otherwise, the Enterprise structure design (Option A) still holds good.

Structures in SAP HR: Personnel Structure

SAP HCM Personnel structure categorizes the employees in a company. It consists of the following elements:

Employee Group

Employee groups represent a primary classification of employees. They are created using one-character alphanumeric codes. Like the Personnel area, the Employee group also has the below functions:

  • Used as a selection criterion for reports
  • Used as a field for authorization checks
  • Serves as a basis for the generation of default values for infotype fields

Employee Subgroup

This is a subdivision of an Employee Group. It is created as a two-character alphanumeric code. Just as all control features for the Enterprise structure are defined at the Personnel Subarea level, the control features for the Personnel structure are defined at the Employee Subgroup level. The main functions of an Employee Subgroup are:

  • Controls how an employee is handled in Payroll
  • Determines the grouping for Collective Agreement
  • Determines groupings for Time Management (e.g., Work Schedules, Absence Quotas)
  • Determines the permissibility of wage types
  • Serves as a basis for the generation of default values for infotype fields
  • Used as a selection criterion for reports
  • Used as a field for authorization checks

An Example

Assume that Company 1 has the following categories of employees – Top management, Management, Executives and Trainees. Each of these categories can be subdivided as shown below:

SAP HCM Personnel Structure Example
SAP HCM Personnel Structure Example

The above figure represents the Personnel structure of the company, with the first level denoting Employee Groups and the lower level, Employee Subgroups.

Keeping in mind the functions of the Employee Subgroup, we should check if there is need for further subdivision of the above.

You can ask the following questions:

  • Are there are any differences in HR policies or regulations within an Employee Subgroup? Assume the answer is yes. Sales managers are entitled to receive a target-based Incentive while other managers are not. This implies that the Incentive wage type should be permissible for Sales managers only. This would necessitate having a separate Employee Subgroup for Sales managers.
  • Should any reporting be done using a selection criterion that is not already an Employee group or Subgroup? Assume the answer is yes. The client requires a count of Management trainees in the organization. Hence a separate Employee subgroup should be created for Management Trainees.
  • Should infotype field values be defaulted based on any other criterion? Assume the answer is no, hence no further subdivision is required.
  • Are authorization checks required based on an employee category other than the above?

Assume the answer is no, hence no further subdivision is required. Let’s redesign the Personnel structure in accordance with these answers. This figure below depicts the revised structure.

Revised SAP HCM Personnel Structure Example
Revised SAP HCM Personnel Structure Example

Payroll Area

This entity is used to group employees who should be accounted in the same payroll run. The Payroll area is created as a two-character alpha-numeric code. It is assigned a Period modifier which controls the periodicity of payroll. For example, payroll can be run monthly for salaried employees, and weekly for contractors by assigning these employees respectively to two different payroll areas.

Note that there is no direct relationship between the payroll area and the Employee Group/ Subgroup.

Organizational Key

This is an optional field which is used for authorization checks. It is often considered a part of both SAP HCM Enterprise structure and Personnel structure, depending on how it is designed. It can be configured using elements of the Enterprise structure and Personnel structure as per your client’s requirement.

For example, the standard SAP authorization objects do not contain a Personnel Subarea field, so you can configure the Organizational key as Personnel subarea, and this can then be used for the authorization check.

Did you like this tutorial? Have any questions or comments? We would love to hear your feedback in the comments section below. It’d be a big help for us, and hopefully it’s something we can address for you in improvement of our free SAP HR tutorials.

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1 thought on “Structures in SAP HR”

  1. Hi …
    This Tutorial is good, but course should be teacher student interactive . what I mean to say is the online courses like this have to assess how much a student is getting understood by the these lessons. so by at least giving some exercises and questions and giving answers to them by evaluating his understanding .

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