EMPLOYEE GROUP AND EMPLOYEE SUBGROUP IN SAP HR

Employee Areas/SubAreas

Employee Group - The employee group subdivides employees into various categories
for e.g.
1.  External
2.  Active
3.  Pensioner 

Employee Subgroup - Employees are differentiated further within the employee group.  Active employees are differentiated according to their status - trainee, hourly wage or salaried employee etc.

The employee subgroup grouping for the Personnel Calculation Rule allows you to define different payroll procedures for different employee subgroups, for e.g. you can specify whether an employee pay should be accounted on an hourly or monthly basis.

IMG -> Enterprise Structure -> Definition ->  Human Resources Management 

-> Employee Groups
-> Employee Subgroups