The payroll function within organizations of whatever size is vital but there continues to be some debate over whose responsibility it should be – HR or finance? We look at where the buck should stop.
A natural fit
Payroll would seem to fall into the remit of both HR and finance but sometimes it’s unclear where it fits naturally. Some argue that HR is its natural home, others that finance should have responsibility and yet further arguments maintain that it should either be split between the two or outsourced altogether.
There is no doubting its importance or the sensitivity which is attached to payroll. Employees all work for a wage or a salary and ensuring that they are paid the correct amount on time is essential.
Employee confidentiality is also paramount and data protection procedures must be in place. For these reasons and for others involving direct employee enquiries, time-sensitive issues, bonuses, redundancy payouts and benefits, some organisations make HR responsible for dealing with payroll.
Other businesses make a counter-argument, however. They maintain that because payroll is one of the largest expenses within any business or department, it must be classed under the auspices of finance. Issues such as reconciliation and compliance with taxation require specialist training and knowledge in order to comply with current and constantly-changing legislation.
A third point of view is that payroll should be split between HR and finance within an organisation. This approach tacitly understands that differentiations between the function of the departments can lead to payroll being regarded as falling between two stalls but recognises that it must be dealt with by both.
Finally, a significant proportion of organisations now outsource their payroll function to a third party specialist. The reasons for this can be summed up neatly: cost and resources.
Where overlap between HR and finance does occur, the responsibilities shared by the departments must be clearly delineated to establish functional and effective procedures. Collaboration is essential to ensure, for example, efficient hiring and firing, maternity pay, bonus calculations and overtime payments for individual employees. When both departments are involved, they can each ensure quality control procedures are in place and accountability is established.
Whether responsibility is shared or allocated to one specific department, one payroll essential is effective computer systems which can be incorporated into an organisation’s precise needs. Specialist, integrated software allows HR and finance departments to effectively perform their functions and retain autonomy in the areas in which they specialise which is why more and more businesses, both small and large, are taking advantage of the systems available at the moment. Companies such as CIPHR offer great Software for HR which can not only save organisations time and money, but improve efficiency through on-line accessibility and increased accuracy. More complex functions, such as payslip generation and distribution, electronic P6/P9/SL1 and SL2 can also be handled by such software, whether it’s in-house or outsourced, to provide seamless functionality for payroll.
So whatever size of business you’re involved with, from SME to multi-national, effective payroll function must remain at the top of the HR and/or finance agenda.
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