SAP Payroll is very country-specific and customer-specific. Therefore, the following only explains the global concept of the payroll.
Payroll is the calculation of payment for work performed by each employee.
Payroll comprises a number of work processes, including the generation of payroll results and compensation statements, bank transfers, and check payments.

Additional subsequent activities include, for example, the transfer of payroll results to Financial Accounting (FI), the execution of the Data Medium Exchange (DME) file, and other evaluations such as running the payroll account and payroll journal.
Calculation of Payroll
The calculation of remuneration comprises two main steps:
- Calculation of compensation elements (the gross amount).
- Calculation of statutory and voluntary deductions (the net amount).

These payments and deductions are included in the payment calculation using different wage types. These wage types must be configured country-specific and customer-specific.
Wage Types
Employee compensation elements consist of individual wage and salary types processed during a payroll period. Wage types are mostly configured for master data and time management, examples of which are shown in the figure below:

Payments such as basic pay, various bonuses, and gratuities are included in the compensation calculation. An employee’s remuneration consists of all wage types calculated for the employee during a payroll period.
Statutory and Voluntary Deductions
Voluntary deductions are generally made for items such as charitable contributions, company-sponsored day care, or similar benefits. Various factors, such as the legal requirements of a country, determine whether the benefits increase or decrease the taxable income. Statutory deductions are made for pension contributions and taxes, for example.

Different gross values, for example, the total gross amount and the gross tax amount, are used to calculate the deductions. For this reason, different totals are formed during the payroll run, and these totals are used for subsequent processing.