03 Jul Why Companies Are Switching to Open Source HCM Before August 2026
Key Takeaways
- From 2 August 2026, recruitment AI systems are classified as high-risk AI under the AI Act (Regulation EU 2024/1689).
- A typical HCM migration integrated with ERP takes 9-12 months, while a standalone HCM system takes 6-9 months (SAP Community, 2025).
- A system change decided after the deadline takes effect means implementing under both project pressure and regulatory pressure at once.
- Open source HCM lets companies verify AI Act compliance before migration – through code access – rather than only after go-live.
- Penalties for AI Act non-compliance reach up to EUR 15 million or 3% of global annual turnover.
Introduction
Switching to open source HCM before August 2026 is a decision more companies are making for calendar reasons, not ideological ones. The AI Act (Regulation EU 2024/1689) imposes full obligations from 2 August 2026 on HR systems classified as high-risk – we covered these in detail in our article on HR obligations before 2 August 2026. An HCM migration takes 6 to 12 months, which means most companies can no longer finish one before the deadline. What matters now is different: the earlier the decision, the shorter the period a company spends running a system that is already formally non-compliant.
Why does the 2 August 2026 deadline force an HR system decision now?
The 2 August 2026 deadline forces the decision now because a typical HCM migration takes longer than the time left before it. According to Selective Data Transition: HCM migration to the cloud (SAP Community, 2025), migrating an HCM system integrated with ERP takes 9-12 months on average, and a standalone system 6-9 months. A company starting to select a new system in July 2026 will, at best, finish implementation after the AI Act’s obligations already apply.
How does AI Act preparation differ between open and closed systems?
In a closed system, preparing for the AI Act means relying on the vendor’s assurances that the algorithm is compliant, with no way to verify this independently. In an open source system, the company has access to the source code and can check how the AI’s decision logic works within an architecture built for transparency from the ground up, before even deciding to migrate. This reverses the order: instead of implementing a system and trusting its compliance, you can verify it before signing the contract.
How long does a typical HCM migration take, and what does that mean for the timeline?
A typical HCM migration takes 6 to 12 months, depending on the complexity of integration with other systems (SAP Community, 2025). For a company starting this process in July 2026, this means the migration will still be running well past 2 August 2026 – the old system remains active, and subject to full obligations, throughout most of the transition.
| Process stage | Migration started July 2026 | Migration started January 2027 |
|---|---|---|
| Vendor and system selection | August-September 2026 | February-March 2027 |
| Implementation and data migration | September 2026 – March 2027 | April – October 2027 |
| Compliance status on 2 August 2026 | Migration underway, old system still active and subject to obligations | Old system subject to full AI Act obligations for the entire migration period |
| Regulatory pressure during implementation | Moderate – process already in motion | High – company operates non-compliantly throughout the migration |
What risk does staying on the current system after the deadline carry?
Staying on a non-compliant system after 2 August 2026 exposes a company to financial penalties of up to EUR 15 million or 3% of global annual turnover, whichever is higher. A more serious operational risk is the possibility of a regulator ordering the system to be shut down mid-recruitment, which halts HR processes entirely rather than just adding cost.
What does switching to open source HCM look like step by step?
Switching to open source HCM starts with auditing the current system against AI Act requirements – checking whether the vendor can even provide documentation of its decision logic. The next step is selecting an open source system, such as MintHCM, with a publicly available code repository. Data migration, configuration, and compliance testing follow, each stage independently verifiable rather than dependent on a third-party vendor’s confirmation.
What does a company actually gain by starting migration before the deadline instead of after?
A company that starts migration before 2 August 2026 shortens the period it spends running an old system already subject to full AI Act obligations, even if the implementation itself finishes later. It also gains the ability to schedule migration outside peak recruitment or payroll periods, reducing the risk of errors. A migration started with lead time, under full control of its own timeline, costs less than one begun in a rush after a regulator intervenes.
Frequently Asked Questions
Is migrating to open source HCM more expensive than staying on the current system?
Migration cost depends on company size and integration complexity, but it should be weighed against the potential penalty (up to EUR 15 million or 3% of turnover) and the cost of a rushed implementation, which typically generates more errors and rework.
Can I test AI Act compliance before completing a full migration?
Yes. In open source systems, access to the source code lets you verify the AI’s decision logic before signing an implementation contract, which is not possible in closed systems.
What happens to a company that hasn’t switched systems by 2 August 2026?
A company using a non-compliant high-risk HR system after this date faces financial penalties of up to EUR 15 million or 3% of global turnover, plus the risk of a regulator ordering the system to be shut down.
Does an HCM system migration always take several months?
According to SAP Community (2025), yes – a standalone HCM typically takes 6-9 months, and a system integrated with ERP 9-12 months. Shorter implementations are possible with smaller data volumes and simpler integrations.
Does responsibility for compliance sit with the vendor or the company using the system?
Under the AI Act, responsibility for compliance sits with the deployer – the company using the system – regardless of any assurances the vendor gives about its product’s compliance.
How does the risk of migrating now differ from migrating after the deadline?
A migration started before 2 August 2026 still runs mostly under the AI Act’s obligations, but for a shorter period, since the company acted early. A migration started only after that date means the company delayed action despite already-applicable rules, extending its total exposure and making due diligence harder to demonstrate to an auditor.
Does open source HCM guarantee full AI Act compliance?
No, not automatically. Source code availability is a necessary condition for verifying compliance, but the company still needs to run its own audit and implement required mechanisms, such as human oversight of AI decisions.
Sources
Regulation (EU) 2024/1689. Official Journal of the European Union, 12 July 2024.
Selective Data Transition: HCM migration to the cloud. SAP Community, 2025.