Salary Structure and Planning in SAP HCM

Introduction

Salary structure and planning in SAP HCM is a critical aspect of Human Resources management. It allows organizations to define how employees are compensated based on job roles, experience, and other factors. This tutorial will guide you through the process of configuring salary structures and planning salary increases for employees using SAP HCM.

Step 1: Understanding Salary Structure in SAP HCM

A salary structure in SAP HCM defines the different pay grades, salary ranges, and job roles within an organization. It provides a framework for salary planning and ensures consistency in how employees are compensated.

Key components of a salary structure include:

• Pay Grades: These are defined levels within an organization that correspond to different roles or job categories.
• Salary Ranges: Each pay grade has a salary range, typically defined by a minimum, midpoint, and maximum salary.
• Job Roles: These are specific roles or positions that employees hold within the organization.

Example: In an organization, a "Junior Developer" might fall under pay grade 1 with a salary range of $40,000 - $60,000, while a "Senior Developer" might be in pay grade 3 with a salary range of $80,000 - $100,000.

Step 2: Configuring Salary Structure in SAP HCM

Configuring the salary structure in SAP HCM involves defining pay grades, salary ranges, and assigning them to various job roles within the organization.

To configure a salary structure:

• Go to transaction SPRO or navigate through the menu: Customizing → Personnel Management → Compensation Management → Define Salary Structure.
• Select Pay Grades to define the different pay grades used in your organization.
• For each pay grade, set up salary ranges by defining:
  • The minimum, midpoint, and maximum salary for each grade.
  • The salary scale that applies to different employee roles or departments.
• Assign the appropriate salary range to each pay grade. For example, the "Junior Developer" pay grade could be set to range from $40,000 to $60,000.
• Define any special rules for compensation, such as bonuses, incentives, or allowances, that apply to specific pay grades or job roles.
• Save your configuration and apply it across the organization.

Once the salary structure is set up, it can be used to ensure that employees within each grade are paid fairly according to their role and experience.

Step 3: Salary Planning in SAP HCM

Salary planning in SAP HCM allows HR professionals to plan and manage salary increases, promotions, and adjustments. The planning process takes into account factors such as employee performance, budget constraints, and market conditions.

To plan salaries for employees, HR professionals need to use compensation planning tools within SAP HCM.

Example: A company is conducting its annual salary review and wants to plan a 5% salary increase for employees in pay grade 1 based on their performance evaluation.

To begin salary planning:

• Go to transaction PH11 or navigate through the menu: Human Resources → Personnel Management → Compensation → Compensation Planning.
• Select the employees or departments to include in the salary planning process. In this case, select employees in pay grade 1.
• Set up the compensation planning scenario by defining the following:
  • Eligibility criteria (e.g., performance rating, tenure, job role).
  • Budget limits (e.g., total percentage increase available for all employees).
• Define the salary increase percentage or amount for each employee based on their performance ratings or other criteria.
• Review the salary planning results to ensure that the salary increases are within the set budget.
• Make any adjustments necessary to ensure fairness and consistency.
• Finalize and save the salary planning results.

Salary planning tools in SAP HCM help ensure that salary increases are distributed fairly, based on individual performance, and within the organization’s budget constraints.

Step 4: Managing Salary Adjustments

Salary adjustments can be made for a variety of reasons, such as promotions, role changes, or market adjustments. These adjustments are typically handled outside the regular salary planning cycle.

Example: An employee is promoted from a "Junior Developer" to a "Senior Developer" position. As part of this promotion, their salary needs to be adjusted according to the new pay grade.

To manage salary adjustments:

• Go to transaction PA30 or navigate through the menu: Human Resources → Personnel Management → Employee Data → Maintain Employee.
• Select the employee who is receiving the salary adjustment.
• In the "Compensation" section, update the employee's salary according to the new job role and pay grade.
• Specify the reason for the adjustment (e.g., promotion, market adjustment).
• Save the changes, and the system will update the employee’s compensation record.

Salary adjustments are crucial for reflecting changes in employee roles or responsibilities and ensuring that employees are compensated fairly.

Step 5: Reporting in Salary Management

SAP HCM provides various reporting tools to track salary distribution, monitor pay equity, and analyze compensation data. Reports help HR professionals make informed decisions and ensure that compensation practices align with organizational goals.

Example: The HR department wants to generate a report to analyze the salary distribution across different pay grades and departments.

To generate salary reports:

• Go to transaction S_ALR_87013611 or navigate through: Human Resources → Reporting → Compensation → Salary Reports.
• Enter the selection criteria such as department, job role, or pay grade.
• Execute the report to view salary distribution across the selected criteria.
• Export the report to Excel or PDF for further analysis and review.

These reports allow HR professionals to identify trends, ensure equity in pay, and provide valuable insights for future salary planning cycles.

Step 6: Conclusion

Salary structure and planning in SAP HCM are essential components for managing employee compensation in an organization. By configuring salary structures, planning salary increases, and adjusting pay based on performance and market conditions, organizations can ensure that employees are compensated fairly and equitably. Using SAP HCM’s reporting tools, HR professionals can gain valuable insights into compensation practices and ensure alignment with organizational goals.