SAP Payroll Process Overview: Flowchart & Process Steps

SAP Payroll Process

Payroll is a process to calculate the salary and wages of permanent and temporary employees of an organization. Payroll calculation considers an employee’s attendance, bonus, overtime, tax rules and other information to generate the pay slip of that employee. Payroll can be run daily, weekly, bi-weekly, monthly depending on the salary cycles of the organization.

The following flow chart gives depiction of the SAP HR payroll process along with the status of the control record during each phase.

SAP Payroll Process

SAP Payroll Process Overview

Released Payroll

  • At this stage, the Payroll Control Record is set to “Release for Payroll”.
  • Past and present HR Master Data is locked for those particular employees. However, future dated changes in master data are permitted in your SAP system.
  • If the payroll is released from the “Exit” stage, the system rolls into the next payroll period, increases the payroll area period number by 1 in the Payroll Control Record (for example, from period 01/2008 to 02/2008).

Start Payroll

  • You execute the payroll run for one payroll area, for the payroll period defined in the Payroll Control Record.
  • If errors occur, you will get a list of employees rejected during the payroll run. The system has stored the employees rejected during the payroll run in something called “Matchcode W”.


  • At this stage, the Payroll Control Record is set to “Released for Correction”.
  • Past and present HR Master Data for those particular employees is now unlocked for corrections.
  • You should make appropriate corrections to fix the payroll errors.
  • Once you have made the appropriate corrections, you need to Release Payroll and Start Payroll using Matchcode W, which will only select the employees that were rejected during the previous payroll run.
  • You can cycle between the “Corrections” and “Released Payroll” stages as many times as necessary.

Exit Payroll

  • At this stage, the Payroll Control Record is set to Exit Payroll.
  • Past and present HR Master Data for those particular employees is now unlocked in your SAP system.
  • The payroll run is closed off for the particular period. You cannot go backwards in respect to payroll results.

Payroll Area

  • Typically an organization have a variety of employee types who are paid at different pay frequencies. For example, blue collar workers are paid weekly, white collar employees are paid monthly, part time employees are typically paid bi-weekly.
  • Payroll Area groups employees together on the same payroll run frequency (semi-monthly, monthly, etc.).
  • When executing a payroll for a particular payroll area all employees belonging to that payroll are processed. This avoids the need for running payroll individually for employees who are paid at same frequency

Payroll Periods

  • Records of payroll run for earlier months an employee are always stored for tax, audit and retro purposes. Suppose the current month is Oct 2010 and you want to refer to the payroll results for the month of Jan 2010 for an employee who is paid on monthly basis. It surely is easy to look for this data. But what if the employee is configured to be paid every 9 days and you want to know what his 16th payslip, for the current financial year, looked like. How do you go about searching for this data ? Inconvenient isn’t it ? Well, Enter Payroll Periods.
  • Payroll Periods represents the period for which regular payroll is run.
  • It is identified by a period number and a payroll year.
Payroll Periods
Payroll Periods
  • The payroll period includes a “start date”, an “end date”. In the above example period 01 for payroll area xx has start date 01/01 and end date 01/31
  • For each payroll area, payroll periods are generated for current and future years.
  • When generating payroll periods, the period number depends on the period parameter (semi-monthly, monthly, etc.) and the start of the fiscal year. For example, for countries for which the financial year starts in April, payroll period “01 2010” represents the payroll period for April 2010.

Pay Day

  • Its the date the salary is credited to bank account of the employee.
  • Pay Day differ from organizations to organizations. Some pay on the last working way of the month. Some companies pay last months salary on the 10th of the current month.
Pay Day

Pay Day