Updated 2-Sep-25

Introduction

Oracle’s Human Capital Management (HCM) and Enterprise Resource Planning (ERP) applications share enterprise structures and workers. The single source of truth eliminates the effort, risk, and timing differences inherent in custom integrations.

In our experience, customers often implement HCM before ERP. Hence, enterprise structures defined for HCM may impact a subsequent ERP implementation. In most cases, implementers can adapt existing setups and usage to reflect ERP related requirements. However, a few foundational enterprise structures may present challenges once transactions exist for them.

This post will:

  • Highlight dependencies that you should bear in mind when implementing HCM before ERP.
  • Offer best practices that avoid imposing limitations on your subsequent ERP implementation.

Worker Assignment Business Units (aka HCM Business Unit) 

Business units are a key shared enterprise structure. They represent operational departments that perform one or more business functions. Examples of Cloud ERP business functions include Payables Invoicing, Customer Payments and Requisitioning. Business units determine the ledger and hence, chart of accounts of their financial transactions. Not all business units are assigned to a ledger because some business functions and hence, business units do not generate financial transactions. For example, a global procurement business unit that manages suppliers but not financial transactions.

Implementers often refer to the business unit on worker assignments as the HCM business unit although, no HCM business function exists. You can select any business unit no matter which business functions it has. For more details, see the Business Units section of the Cloud ERP Enterprise Structures White Paper on Customer Connect.

The following features use the worker assignment business unit.

Assignment BU in HCM, Projects, Procurement and Expenses

Note that ERP recognises only the overall primary assignment which is the primary assignment in the primary work relationship. ERP and its workflow approvals do not use secondary assignments or other work relationships. For more details, see the Assignments section of the Using Global Human Resources book.

HCM

The worker assignment business unit is:

  • An optional reference data determinant for jobs, departments, grades and locations. Reference data sets control lists of values. See the Reference Data Sets section of the Implementing Applications book for more details.
  • One of the available areas of responsibility (AOR) scopes. Areas of responsibility secure access to worker assignments. See the Secure Person Records by Area of Responsibility of the Securing HCM book for more details.

Expenses

When entering expense reports through a self-service user interface, the worker assignment business unit determines the following key expense report features:

  • The expense report’s primary ledger and chart of accounts. If you implement Expenses, you must assign the worker assignment business unit to a primary ledger even if you plan to account for Expenses using a legacy financial application.
  • The expenses template.
  • The expense report’s legal entity which it derives from the worker assignment’s legal employer. Expenses does not use the business unit’s default legal entity.

Projects (Time & Labor)

When entering Time & Labor transactions through the self-service user interface, the worker assignment business unit determines its ledger and chart of accounts. Hence, if you implement Time & Labor, the worker assignment business unit must have a primary ledger.

Requisitioning

Procurement automatically grants users access to the primary worker assignment business unit to manage requisitions.

  • Self-service users acquire an entitlement to create requisitions in the worker assignment business unit.
  • Managers acquire an entitlement to report on the data in the worker assignment business unit.

In both cases, you can modify the default security assignments to suit your business requirements. See the Overview of Security for Oracle Fusion Cloud Procurement of the Securing ERP book for more details.

Mass Changes

HCM offers the Mass Change feature to update the worker assignment business unit. In other words, you could modify the configuration and assignments at a later date. Nevertheless, a far reaching re-configuration to align them with ERP’s requirements could be onerous and, in effect, imposes some limitations.

Best Practices for Worker Assignment Business Units When Implementing HCM Before ERP

The worker assignment business unit should be country specific

A worker assignment business unit that extends across multiple countries would oblige the Expenses and Time & Labor business units and hence, ledgers to do the same. While ERP supports this configuration, you should carefully consider its implications for usability and local compliance. For more details, see the Legal Entity Specific Secondary Ledgers section of the Cloud ERP Enterprise Structures White Paper on Customer Connect.

Address requirements for global, regional or division level worker assignment business units as follows:

  • Use the HCM Division enterprise structure to address requirements to report on multinational management entities. For example, to represent a global line of business.
  • Configure reference data sets so that country level worker assignment business units share global regional or division jobs, departments, grades or locations.

Avoid highly granular worker assignment business units

Worker assignment business units that represent many detailed local departments or locations may result in additional setup and maintenance tasks. You must:

  • Assign the Expense Management business function to each worker assignment business unit and, using the service provider model, to each Payables Payments business unit.
  • Create and maintain a separate employee expense template for each worker assignment business unit.
  • Assign the Project Accounting business function to each worker assignment business unit.
  • Duplicate the Project Accounting intercompany setup for each worker assignment business unit.
  • For most workers and managers, explicitly grant access to the Requisitioning business unit.

In the following diagram, the green rectangles represent the worker assignment business unit. On the left hand side, two business units represent multi-country divisions. On the right hand side, the business units represent very granular departments or locations. In the center, there is single a business unit per country.

Different assignment BU granularities

The diagram offers only general guidance. For example, you may decide that the benefit of two or three worker assignment business units per country outweigh the additional setup and maintenance effort.

Do not assign a ledger to the worker assignment business unit until necessary

Cloud General Ledger (GL) strictly controls the changes you can make to a chart of accounts once an account combination exists for it. To avoid limiting design choices when you come to implement ERP, create business units for your HCM implementation’s worker assignments with no business functions and with no primary ledger. When the time comes, you can update business units to add business functions and primary ledgers.

Note: you should never change a business unit’s primary ledger if you have created setups (for example Payables Options) or subledger transactions for it.

Payroll – Ledgers, Calendar and Chart of Accounts

When you implement Payroll before Cloud ERP, the recommended approach depends on whether you account for its results in Cloud GL or a legacy financial application.

Account for Payroll in Cloud GL

If you choose to account for Payroll results in Cloud GL, the Payroll implementation must include shared Cloud ERP enterprise structures: ledgers, calendars and chart of accounts. The Payroll accounting will generate journal entries and balances in Cloud GL.

In effect, when you implement Payroll, you configure your financial enterprise structures. Cloud General Ledger (GL) strictly limits the changes you can make to COA’s and ledgers once they have been used. Hence, you should consider enterprise wide requirements for your future COA.

Account for Payroll in a Legacy Financial Application

If you choose to account for Payroll results in a legacy financial application, the ideal HCM configuration should minimize dependencies on Financials enterprise structures.

  • Do not configure ledgers for your payrolls. Ledgers must have a retained earnings account. GL strictly controls the changes you can make to a chart of accounts once an account combination exists for it.
  • Do not configure internal bank accounts for your payroll disbursements. Internal bank accounts must have a legal entity which is itself assigned to a primary ledger.

Following these guidelines will allow you to delay gathering requirements for financial enterprise structures until the financial implementation gets underway.

Payroll – Costing Key Flexfield

If you choose to account for Payroll results in a legacy financial application, you will configure the payroll cost allocation flexfield to allocate costs to the appropriate legacy analytical and financial dimensions.

When you subsequently implement ERP, you will account payroll costs in Cloud GL. To do this, configure Subledger Accounting rules to map the Payroll cost allocation flexfield to the chart of accounts. Subledger Accounting offers powerful account rules and mapping sets to transform your legacy payroll cost allocation segment values and combinations into General Ledger account combinations.

When you implement Cloud ERP, the cost allocation flexfield may not contain sufficient detail to generate General Ledger account combinations; or the mapping between the legacy cost allocation flexfield and the new chart of accounts is complex and hence, difficult to maintain.

To ensure consistency over time, Payroll prohibits modification of cost allocation flexfield segments. However, it does allow new segments to added. You can take advantage of this to:

  • Support the accounting flexfield’s greater level of detail.
  • Simplify the mapping between the cost allocation flexfield and General Ledger chart of accounts. You can do this, for example, by sharing legal entity, natural account, cost center and other value sets between the two flexfields.

Follow these steps to adapt the Payroll cost allocation flexfield to the General Ledger chart of accounts.

  1. Add required new segments to the Payroll cost allocation flexfield. See the Payroll Cost Allocation Key Flexfield Setup section of the Administering Global Payroll Costing book.
  2. Reconfigure payroll cost allocation rules to use the new segments where appropriate. Ensure that you update the Suspense Account and Default Accounts in the Payroll, Department Costing, and Costing of Payment Sources. Use date effectivity to ensure an orderly transition to the updated rules. See Payroll Setup for Costing Accounts section of the Administering Global Payroll Costing book.
  3. Configure Payroll Subledger Accounting rules to map payroll cost allocation segment values to the corresponding accounting flexfield segments and combinations. See Payroll Setup Tasks for Subledger Accounting section of the Administering Global Payroll Costing book.

When You Implement ERP

Consider these potential issues when you subsequently implement Cloud ERP.

Payroll – Locations

In some geographies, Payroll works in conjunction with location and payroll tax content providers. Since HCM and ERP share locations, the ERP implementation will inherit the same locations. Make sure that you take such dependencies into account before finalizing your global location design.

Approval Workflows

ERP workflows significantly increase the number of workers referenced by Business Process Management (BPM) workflows. When you come to implement ERP, the HR department may need to review the procedures they follow when workers change job or leave the company.

Roles and Privileges

HCM, ERP and Enterprise Performance Management (EPM) share some security privileges. Be aware that reorganizing roles and privileges as part of the ERP implementation could potentially impact other pillar’s users.

Expenses with HCM

Some customers implement Expenses alongside HCM and before other Cloud ERP subledgers such as Procurement, Payables and Assets.

Expenses is a financial application that generates accounting. Even if you have chosen to account for Expenses in a legacy financial application, its configuration relies on Cloud ERP enterprise structures. Once again, bear in mind that Cloud General Ledger (GL) strictly controls the changes you can make to a chart of accounts once assigned to a ledger.

Conclusion

By following the above recommendations, you can ensure that your ERP implementation is free from limitations imposed by an earlier HCM implementation.