Understanding Indirect Valuation in SAP HR

In SAP Human Resource (HR) Management, indirect valuation is a powerful tool that streamlines payroll calculations and ensures accuracy. This concept allows you to determine the value of certain wage types based on other existing wage types within the employee’s payroll data. Let’s explore indirect valuation, its importance, and how it works.

What is Indirect Valuation?

Indirect valuation means that the value of a particular wage type is not entered manually. Instead, it is automatically calculated based on a percentage, factor, or formula linked to one or more other wage types – often a type of basic pay. This automated approach saves time and reduces the potential for errors during payroll processing.

Why Use Indirect Valuation?

Indirect valuation offers several benefits for HR departments:

• Efficiency: Indirect valuation eliminates manual calculations, streamlines the payroll process, and saves valuable time.
• Accuracy: By automating calculations based on predefined rules, indirect valuation reduces the risk of human error, ensuring accurate wage-type values.
• Consistency: It helps maintain consistency in payroll calculations across an organization, regardless of employee groups or payroll complexities.
• Flexibility: Indirect valuation can accommodate various calculations and complex payroll scenarios, including those with varying allowances and deductions.

How Indirect Valuation Works in SAP

1. Wage Type Configuration: Within the SAP HR system, wage types are defined and configured to specify if they are directly entered or indirectly calculated.
2. Indirect Valuation Module (INVAL): The INVAL module within SAP HR defines the logic for indirect calculations. Module variants (‘A,’ ‘B,’ ‘C,’ ‘D’) and various operations facilitate different calculation methods.
3. Payroll Schema: The payroll schema incorporates the necessary INVAL function calls, connecting to the indirect valuation rules for execution during payroll runs.

Everyday Use Cases for Indirect Valuation

• Basic Pay Calculations: Calculate other wage types as a percentage of an employee’s basic pay.
• Allowances and Deductions: Automate the calculation of various location-based allowances, company-provided benefits, and deductions based on rules and percentages of other wage types.
• Tax Calculations: Facilitate tax calculations that depend on a combination of wage types.
• Bonus and Incentives: Calculate bonuses or incentives based on performance metrics or other criteria linked to specific wage types.

Important Note:

The configurations involved in indirect valuation can be quite intricate. It’s generally advisable to consult a qualified SAP HR professional to customize and set up indirect valuation modules and rules within your specific SAP system.

In Conclusion

Indirect valuation is an invaluable tool for HR professionals using SAP HR to manage payroll. By understanding its concepts, benefits, and mechanisms, you can optimize your payroll processes, ensuring your workforce’s accuracy, consistency, and timely salary disbursements.