In international companies that implement global SAP projects, the implementation of systems for the management of human capital have a specific opinion of being prone to high risk. This is due to the diverse and often quite variable and specific legislation on the calculation of wages in different countries. In the corporate landscape, SAP HR systems are very often separated from SAP ERP installation, separately implemented, maintained and developed. Therefore, even in large multinational companies, which have their own SAP competence teams dedicated to deployments, and rollouts, a common practice is to entrust SAP HR projects in subsequent foreign branches to consulting companies in these countries.
Good knowledge of the local conditions and legislation of the local partners is seen as a factor that diminishes the risk of these projects. It is of course true, however, this risk only applies to the area of wage calculation because human resource management is much more than a payroll list.
For the implementation of SAP HR system in its Danish headquarters, Toms Gruppen engaged in the production of sweets decided to collaborate with SNP – consulting company from Poland. One of the arguments behind the choice of this service provider was the successful collaboration in a similar project in the Polish Branch of Toms two years earlier. This cooperation is still ongoing; – Toms Poland uses the SAP application services in SNP, i.e. remote support for users in their daily work with the system.
The system model developed in Poland has become a standard that can be used by the Danish headquarters of the company, thus contradicting the popular belief that it is best to entrust a local project to a local company. Toms made use of the advantage of SNP in terms of an excellent knowledge of the Polish model of the system and a good acquaintance of the organizational structure of Toms.
By deciding to establish the system for subsidiaries of Toms in Denmark and Poland on the same mandate, the company used the organizational structure developed in the Polish project as a starting point for the implementation of the human resource module in Denmark. The strategy adopted in Toms Gruppen – a common SAP HR system for subsidiaries in different countries and installation on a single mandate – is associated with big advantages, but also some risks that must be taken into account.
The advantages of a single-mandate installation of SAP HR in a capital group is above all one coherent and clear organizational structure for the entire company, which from the perspective of the management greatly facilitates system reporting, without having to build interfaces or use external systems. Time saving, greater flexibility of reporting, more efficient management of resources – are its greatest advantages.
Another benefit that cannot be overlooked is the lower cost of the system. The single architecture, without the need for interfacing with other applications reduces the cost of implementation. The consistent architecture also allows savings in terms of costs of SAP administration and the maintenance and management of the technical infrastructure.
In turn, the most important risk factors associated with a single installation of SAP HR in an international company include access control to data. The “international" organizational structure, consisting of two or more entities in different countries, requires careful design and creation of a complex system of privileges. A well thought catalogue of roles and profiles of privileges, as well as strategies for the distribution of new privileges (including temporary privileges) is one of the most important tasks in the concept phase of the system.
The design of the system should be laid out carefully and logically. The system must be flexible and provide opportunities for easy customizing of privileges for large groups of users at the slightest changes in configuration. Exclusive access to all data required at work is the essence of the privileges in the system. These demands can easily be fulfilled on the day of the productive start. They should also be a key objective during the whole life cycle of the system – so that e.g., the need to assign additional privileges for one employee in a given company does not result in unauthorised access to sets of data for other people in other entities – just because they have been assigned a similar role.
Also of importance is the technical documentation and concept of privileges, which clearly define the roles, objects of privileges, conditions for changes in privileges, etc. Emerging roles or effected changes should be described carefully in the technical documentation.
Speak the same language
There were a few challenges related to insourcing the HR system and here are some of them. It was quite hard to get the Master Data correct because we had interfaces between our Outsourcing Partner’s system and our own SAP system and this system was not working well, so we had to do a lot of data cleansing and the same applies to the Organizational Data.
To go-live on 1st January with all the things that need to be done when you make the cutover was a challenge because you need to run the last payroll in the old system before you can do the migration and the fact that your outsourcing Partner isn’t the most motivated Partner in this situation makes it a bit cumbersome!
When we implemented HR in our Polish subsidiary, we chose SNP as our project partner after some reference calls plus some very positive meetings with SNP and we had a very smooth project on time and on budget, so actually, when we were talking about implementing HR in Denmark, it was not a hard decision to choose BBC although SNP didn’t have any experience in setting up Danish payroll (in Denmark, we need extra software in order to calculate Net Salary – KMD Nettoløn), so I had to connect SNP with the Danish consulting staff in order to cover the payroll setup and SNP took the overall responsibility for the project incl. Payroll.
When choosing an implementation partner it’s also important for me that we, so to speak, speak the “same” language – not only the consultants but also the Account Managers and other people we meet in the company; that the partner has the resources with the seniority needed to run a complex project and that the partner is willing to make an extra effort when required.
Per Lerche Møller, Group IT Manager, Toms Gruppen
Another aspect that should be kept in mind when installing SAP HR for different countries on a single-mandate is system administration and necessary service work, related among others, with installing the manufacturer’s patches. It is worth noting that SAP HR is distinguished by the frequency of publication of patches and notes. For example, the labour and tax law in Poland changes very often, which generates several or even a dozen mandatory changes in the HR system in the course of a year. The same goes to Denmark. Any such change published by SAP is associated with periodic (short-term) system retention for the entire company. Such a break is needed to upload the changes and perform tests. The time window should be scheduled and maintenance work organized in such a way that the turn off lasts as shortly as possible and does not interfere, e.g. with the payroll wages calculation process, or major maintenance changes in the neighbouring country.
In such a case, as in Toms Gruppen where the common system encompasses branches in two countries, management of the service window becomes a challenge, because the calculation of wages in the company’s SAP HR occurs three times a month (in the Danish company, wages for production workers, so-called blue collars, are held in a two-week cycle).
Inasmuch as personnel (organizational structure, staffing, infotypes e.g., vacations, absences) may be to a large extent consistent for all companies of the group, wages in each country are governed by their own rules – resulting directly from the existing legal regulations in the country, as well as peculiar habits (e.g. customary remuneration components, the different cycles of wage calculation for production and white-collar workers).
While deciding on a common SAP HR system mandate for the two companies – in Poland and Denmark, Toms had to take into account these challenges, and the specificities of its organization.
SAP HR for Toms Denmark
About 150 persons are employed in the Danish headquarters of Toms Gruppen. In terms of salaries, they are divided into two groups: production workers for whom wages are calculated on a two-week cycle, and office workers (white collars) who receive their salaries on a monthly basis. Similarly to Poland, Denmark is also characterized by a fairly complex tax and labour law, which entails a complicated wage calculation system with a large number of remuneration components typical for this country (e.g. types of absences such as half-day leave, extra free days, as well as a peculiar way of settling sick leave).
Implementation of HR tasks in Toms Denmark is resolved as follows. An in-house team takes care of the support for human resources (personnel administration, work time management and organization, leaves, exemptions, recruitment, accounting for travel expenses, training and development, etc.). In terms of wages calculation, Toms uses the services of an external company.
The latter was one of the reasons for the decision to implement SAP HR. Inasmuch as Toms appreciates the advantages resulting from the outsourcing of payroll calculation; the current partner and method of organization of this process have been assessed as having a high risk. Payroll calculation was conducted on a system that belonged to the outsourcer, and which was maintained and developed by the outsourcer. It was assessed as saddled with high risks. The safety aspect of personal data and payroll is very important for Toms. For this reason, and to be independent of the service provider, the decision was taken to implement the SAP HR project.
Interestingly, Toms still outsources payroll calculation. However, the new Business Process Outsourcing service provider – specialized in payroll calculation for entities – works on the SAP HR system that belongs to Toms, and that is also maintained and managed by it.
The major advantages of using BPO in calculating wages is access to highly skilled professionals provided by the external company. Wages are properly calculated and paid on time, without the risks associated with the possibility of sicknesses, resignation or longer leave of a payroll specialist (this is especially important in a two-cycle payment). With the frequent change of the legal bases, the integral elements are also training in the new legislations and their interpretation. Added to these, is the legal responsibility to the tax and control authorities. These items are also “outsourced" and remain the responsibility of the service provider.
Full control over data and system development
Our former payroll partner used a business model according to which they stored all data besides operating payroll processes. We have learned that this is not the best set-up for our company since both system maintenance and data security was completely out of our hands. Data were hard to access and we had no say in the level of security regarding our employees’ personal data storage. Furthermore, the continuous transport of data back and forth brought a need for constant alertness regarding the security and validity of data transferred. This took out a big amount of management focus from business matters.
In our new set-up, we obtain full control over our own data and system development and maintenance. Data are not moved around and only one “truth” can be found when looking for info.
Although we opened a new facility in Poland that needed a tool for payroll and personnel data storage, it must be mentioned that the calculation of net pay is much more complex in Denmark than in the countries of our subsidiaries. So it was much simpler to carry out the pilot SAP HR project in Poland before trying it in Denmark. The tax calculations are extremely complicated in Denmark.
When deciding on changing the set-up in Denmark we also decided to do a clean-up in the old system and make obvious improvements to the system. This is highly recommendable to do since you get rid of all old “ghosts” from the past in this way. This is a simplification in work processes in the system that you will benefit from in the long term.
Pia Fabricius, Vice President Human Resources & Security, Toms Gruppen
The most important project challenges
From the point of view of SAP HR rollout project management, outsourcing payroll calculation constituted additional project challenges. The domain of the rollout system is the involvement in the project of at least three parties: the entity that is the system “donor" (in this case, Toms Poland), the entity to which the solution is rolled out (Toms Denmark), as well as the implementation partner. SNP, as the main contractor, additionally used the support of a Danish consulting firm, which being conversant with the local laws and experience in SAP Payroll – carried out works in the configuration of payroll calculation.
In addition to these typical set of partners, two other companies participated in the Toms Gruppen project: the current payroll service provider, which after the last payroll calculation in 2015, had to hand over at an appointed time a defined set of data to be migrated, and the newly selected BPO company that assumed the provision of services on the new system.
The involvement of so many parties significantly raised the project risks. Therefore, in accordance with good practice in risk management – in establishing work schedule, larger time buffers were planned in these stages, which required the involvement of several parties. Particular attention was paid to the extraction of data from the old system and their migration to SAP HR, where participation and close coordination of timely actions by the parties involved was necessary.
The implementation of such an important system solution for human resources management usually has a priority status for the HR and Payroll department. So was the case in Toms, however, this project was not the only big project carried out at the same time. In parallel, work was ongoing in the implementation of the SAP tools project for employees and managerial staff self-service (ESS/MSS), as well as SAP Travel Cloud solutions for the management of business trips. The involvement of the same persons from the HR and IT departments in all of these projects meant that these people were heavily burdened with work (standard obligations plus work in the project teams). This factor was also important while creating the project schedule.
Another challenge of the project was the two weeks wages calculation cycle in Toms, which considerably reduced the time window for data migration between systems and final tests on the target system. The scheduled start date of the solutions was also not conducive for the project – from the beginning of the new calendar year, i.e. during the holiday season, when there are plenty of days off.
As it turned out – the start scheduled for early January also coincided with an unexpected change in Danish law, which resulted in changes in payroll calculation. In a short space of time, it was necessary to prepare an amendment to the system taking into account the new provisions (the new payroll service provider was responsible for this), upload it to the system and perform a series of required tests, and then, after correcting the errors, and performing series of tests, transfer the solution to the production system. For these additional activities, it was necessary to make out time in the already tight schedule.
The role of the project manager is to take into account all the possible risk factors and to plan the work in such a way that their occurrence does not interfere with the work schedule or endanger the quality of the final effect and timely start. In the described project – given the many “surprises" that occurred in the last phases of the process, in particular for the calculation of wages – success would not have been possible without a huge commitment of those working on the launch of this process. Additional series of tests, repeated simulations, and calculation of wages and subsequent tests were carried out until the productive start. These activities were very time consuming and labor-intensive, especially for consultants (of SNP and the sub-contractors responsible for the configuration of the payroll calculation), as well as the new outsourcing service provider for payroll calculation. However, this effort resulted in the first payroll calculation in the new system in January 2016, which proceeded practically without errors, in a way that is completely transparent for employees.
The management of HR processes with an in-house team and simultaneous outsourcing of payroll calculation to a specialised external entity is a common human capital management model in modern companies. The condition for satisfaction with the organization of such a process is to ensure full security of data, especially sensitive data. Toms Gruppen currently has its own SAP HR system that realizes the entire process. This allowed the company to reduce the risks associated with outsourcing the payroll calculation process and ensures a high level of services, while being independent and having full control over the data and the system.