Most companies customize loan wage types to make it easier for end users to understand what is listed on their payslips. In many implementations, time constraints and strict project time lines keep companies from being able to customize some aspects of the standard SAP ERP HCM system. I show you how to customize the processing of employee loans in SAP Payroll.

First, I describe the standard SAP ERP HCM system and what it can do, and then I show you why and how to make changes to it. For the purposes of this article, I use a case study that is based on my actual implementation experience to illustrate my points.

Case Study: Company A

Company A has a full-fledged SAP ERP HCM system with Personnel Administration, Time Management, and Organizational Management, as well as a well-integrated payroll system with SAP Finance (FI) and Controlling (CO).

The company’s current loan types are listed in Figure 1 (transaction code PA30).

Figure 1

Loan types view

Employee X works for company A and has two loans with the company:

1. A car loan with payment by installments (infotype 0110)
2. A personal loan with payment by installments (infotype 0120)

As of January 2013, he has the following repayment schedule set up for both loans (my example uses rupees as its currency):

1. Rs2000 per month from January 2013 for the car loan (Figure 2)
2. Rs1000 per month from January 2013 for the personal loan (Figure 3)

Figure 2

Loan infotype 0110 (car loan)

Figure 3

Loan infotype 0120 (personal loan)

Now I explain the SAP ERP HCM loan process in an integrated SAP Payroll system. To illustrate this process, I processed the payroll for employee X for the month of January 2013, which resulted in the payslip in Figure 4.

Figure 4

Employee X’s payslip

The payslip should show the employee’s two outstanding loans, how much interest is being paid, and the payment amount (Regular repayment) owed for each of the loans, individually. However, the standard SAP system does not separate the amounts for each loan individually, so the final culmulated total is shown instead of separate amounts for each loan. Therefore, the portion of the payslip that pertains to Interest due and Repayment confuses employees because they cannot determine from this payslip how much is deducted during each pay period for each individual loan they have outstanding.

Now I show you how to analyze the payroll results table in the payroll log of employee X (Figure 5). All the wage types listed in Figure 5 for employee X have generic descriptions, which can cause confusion for payroll administrators when they are calculating these loans.

Figure 5

The results table for employee X

In the standard SAP Payroll system, if there is a loan record with valid entries (as shown in Figures 2 and 3), then, based on the effective dates of the loan infotype’s (0045) master data, the payroll system generates these entries in the results table (Figure 5). This part of master data is processed by sub-schema XLON, which, in turn, is incorporated in the main payroll schema.

Table T512W is a comprehensive view of all the standard loan wage types available in the SAP ERP HCM system (Figure 6). To access this table follow menu path SPRO > Payroll > Payroll India > Company Loans > Set up Customer payment types.

Figure 6

Loan wage type options (table T512W)

Here is the list of the SAP system’s standard wage types:

/LCI = Interest-bearing capital

/LID = Interest due

/LIM = Interest due for the current month

/LLB = Loan balance

/LOE = External loan payment

/LRP = Loan repayment

The issue is that in employee X’s payslip (Figure 4), the entries for L01 and L02 appear as a combined entry, whereas the system splits entries L01 and L02 in the results table for employee X (Figure 5).

This is the standard behavior of the system, although many companies prefer to have split entries and to see their customized wage types with their own definitions rather than the generic entries for system-generated custom loan wage types.

I address both of these concerns and show how to configure the system to meet both of these end-user needs.

Prerequisites

Here is a list of prerequisites for this configuration:

• A full-fledged SAP ERP HCM system with HR master data.
• A full-fledged SAP Payroll system.
• An integrated SAP Payroll–FI/CO system (this configuration is applicable only for integrated systems and is not necessary if you have a standalone payroll system).
• Ideally, the current SAP ERP HCM system is set up so that it uses infotype 0045 (loans) and processes the loans via SAP Payroll.

Configuration Steps

There are four configuration steps:

1. Create company-specific wage types.
2. Copy the standard loan schema to the company name loan schema and modify it.
3. Fine-tune pay slips.
4. Integrate custom wage types with FI/CO (this is applicable only if you have an integrated SAP Payroll–FI/CO environment).

Step 1. Create Company-Specific Wage Types

The first step is to create a company-specific wage type for company-provided loans. Follow SPRO menu path Payroll > Payroll India > Company Loans > Set up Customer payment types.

In the screen that appears (not shown) choose the Define new loan wage type option and double-click it. In the next screen (Figure 7) select the Copy radio button and click the enter icon.

Figure 7

Copy the wage types

In the next screen (Figure 8), select the wage types you want to customize by holding down the shift key and highlighting the appropriate wage type lines. Select the Test run check box. Then click the Copy button.

Figure 8

Select the wage types to be copied

The entries you have selected (Figure 8) are copied into wage type tables (Figure 9). (After I finish describing the basic configuration steps, I discuss this table in more detail later.)

Figure 9

The copied wage types

To create customized Personal loan wage types, repeat the steps that I just explained (Figures 7 through 9). When you finish these steps, the results are shown in Figure 10.

Figure 10

Copy of the loan wage type for a personal loan

Now all the customer loan wage types are ready for your configuration.

Note
Table 1 is the quick reference guide of company-specific wage types I have created to help guide you when setting up your own company-specific wage types.

Table 1

Quick reference tool for customer-specific loan wage types

Once you have created all the company-specific wage types you require, the next step is to copy and modify the schemas.

Step 2. Copy and Modify the Schema

In this step you create a link between these new wage types and the system-generated wage types through the relevant payroll schema. First, analyze the schemas used in payroll processing.

Use transaction code PE01 to display the currently available schemas. The schema used for payroll processing is IN00 (which is an Indian payroll schema driver). The sub-schema called for loan accounting is INLN (the schema has different components, including the sub-schema, which is a set of payroll rules and functions). The other sub-schema used in INLN is XLON. Sub-schema XLON calls the personnel calculation rule (PCR) XLOZ. Next, you need to understand the code written on the rule XLOZ.

To view the currently available PCR (XLOZ), execute transaction code PE02. This activity brings you to the screen shown in Figure 11.

Figure 11

View PCR XLOZ

Now that you’ve created the company-specific wage type, you need to copy the existing PCR from XLOZ to PCR &LOZ. Execute transaction code PE02 and enter XLOZ in the Rule field, and click the copy icon.

In the pop-up screen that appears enter XLOZ in the From rule field and &LOZ in the To rule field. Click the copy icon to copy the rules (Figure 12).

Figure 12

PCR copy mode view

Modify the PCR

In Figure 11, I have included only the relevant wage types required for processing loans in payroll, as listed in Figure 8. The next step is to review them.

To view them in the expanded screen, execute transaction code PE02. Select your rule (Figure 13) and click the + sign (not shown). The next screen (Figure 14) displays an expanded, editable view of loan type /LRP. Now you are ready to customize the rule as per the requirements of your organization.

Figure 13

Edit the PCR

Figure 14

An expanded view of loan type /LRP

In payroll processing, if your loan type is 0100, for example, the payroll system generates the /LIM wage type. Therefore, as per this rule, it generates 1LIM in your results table as well. If your loan type is anything other than 0100 or 0200, then the system generates 2 LIM in the results table.

Edit the Code to Incorporate the Custom Wage Types

In this step you can make additional edits to the code. The screen in Figure 15 is an example of the loan wage type code you can edit. In this example, for wage type /LRP, which is a regularly scheduled repayment amount, the company-specific code is written as shown in Figure 15.

Figure 15

Maintain PCR view

In this example, the system looks for loan type 0110 (car loan). Because it is a car loan, it looks for split entries (a split entry is for multiple loan records under the same loan type).

If the split entry is 01, instead of adding /LRP the system adds the customer wage type 5006, which provides a more specific and appropriate description on the employee’s payslip. If the employee has two loans, the system still generates the same wage type (5006) for both loan types.

Next, follow these same steps for all of the applicable technical wage types. To illustrate, I captured the code for /LLB in Figure 16.

Figure 16

Maintain the PCR

As shown in Figures 15 and 16, I have written the code for all corresponding entries as in Figure 11. In other words, I have modified the code to add a new wage type 5004, and the system now shows wage type 5004 and its text on the employee’s payslip instead of wage type /LLB.

Now that the company-specific PCR is ready, you need to include this PCR in the main payroll sub-schema INLN. Use transaction code PE01 and change PCR XLOZ to PCR &LOZ in the payroll schema (Figure 17).

Figure 17

Display the payroll schema

After you modify the PCRs, it’s time to run payroll in test mode and see the impact of the new rules (Figure 18).

Figure 18

Payroll results table

As you can see in Figure 18, the results table shows all of the company-specific loan wage types from 5001 to 5006 and 6001 to 6006. If you compare Figure 5 with Figure 18, you see that all the new company-specific wage types are captured because of the modified PCRs, resulting in a more accurate and clear payslip for the employee.

Step 3. Fine-Tune the Payslip

The final step in creating these new loan wage types is to call the new custom wage types from the results table to the payslip. In my example, there are two things you want to do to complete your customization:

1. Remove the standard /LRP wage type from the cumulation ID and the payslip window. 
2. Add the new company-specific wage types to the payslip window and the cumulation ID.

Execute transaction code PE51. In the screen that appears enter the relevant Form name for modification (Figure 19). In this case it is ZN07.

Figure 19

Choose the HR form to edit

Select the Window radio button and click the Change button to change the form. In the next screen (Figure 20) double-click W2 to open the pop-up window (also shown in Figure 20). Double-click the number under the Group column (02 in this example).

Figure 20

Edit the HR form

In the next screen (Figure 21) add the required entries to finalize your customization. In this case, you replace the SAP system standard wage types with your customized wage types (e.g., wage types 5002, 6002, 5006, and 6006).

Figure 21

Change the loan wage types in the HR form

Now you want to remove the standard values in the cumulation ID and replace them with a customized ID. Execute transaction code PE51. In the screen that appears double-click Deductions in the Long text column (Figure 22).

Figure 22

Change the cumulation ID in the HR form

Enter the relevant form name marked for modification; in this case, it is ZN07. Select the Cumulation IDs radio button and then click the Change button (Figure 19). In the screen that appears add the custom loan wage types (Figure 23).

Figure 23

Change the cumulation ID

After you modify the payslip, run payroll and see what happens. If you compare Figures 4 and 24, you can see that the company-specific loan wage types’ text with splits are shown in the new payslip.

Figure 24

The modified company-specific payslip

Step 4. Integrate the Custom Wage Types with FI/CO

If your SAP Payroll system is integrated with FI/CO for payroll postings, the final step is to map the new company wage type to the FI/CO system for General Ledger accounting. If you do not do this last step, your loan postings will not be reflected properly in the FI/CO postings.

In Figure 9, the last two entries (T52EL and T52EZ) refer to entries of posting. The final step is to modify these entries to reflect the changes made to the standard loan wage types. You do this by decommissioning the existing posting configuration and introducing the new ones pertaining to the new company-specific loan wage types.

Follow SPRO menu path Payroll > India > Reporting for posting payroll results to Accounting and review your configuration changes with the appropriate FI/CO administrators or managers. Then complete your remaining FI/CO integrations.

Raghavendran Parthasarathy

Raghavendran Parthasarathy works for Hexaware Technologies as a Principal Consultant,where he manages SAP solution design for customers across the globe. He has worked in SAP ERP HCM for over 14 years in various capacities, including payroll projects in the Middle East, Europe, and Asia/Pacific. In addition to payroll, Raghavendran has experience in negative time management, personnel administration, and recruitment. He has also been a part of portal implementations. Currently, he is involved with cloud-based HCM applications such as SAP SuccessFactors and Workday.

You may contact the author at raghs99@yahoo.com.

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