Who handles payroll in a company?

Across most organisations, payroll is undoubtedly a highly valuable function. Yet one burning question is yet to be unanswered: who should look after payroll – the HR or the finance department?

This question continues to be a topic of much debate, with some people thinking payroll should reside within the HR function, while others believe it should sit within finance.

Why the debate?

Payroll is a specialist function in any organisation. It requires a unique set of skills and processes – as well as, sometimes, software – which is in many ways unique and isolated from other processes in a business. Payroll processes may be carried out by a small team or even one person, depending on how big the organisation is and how complex their payroll – or it might be outsourced to a payroll provider, with one or more people overseeing it. Therefore, which team looks after this process is in hot debate in the payroll world. Someone needs to be responsible – but who?

In Deloitte’s most recent payroll operations survey, they targeted experienced professionals in a wide range of industries who lead or are directly involved with payroll operations. The companies who participated ranged in employee size from a few hundred to several hundred thousand. Traditionally, payroll has been split between finance and HR. However, the data from their survey shows a growing trend where organisations are shifting payroll from reporting to finance to either HR or a shared service.

However, this data shouldn’t sway you into deciding who should take responsibility for payroll in your organisation. The answer resides within your business’ structure and processes. Lets look at both sides of the coin so that you can make the right decision for your business.

Payroll in HR

Naturally, payroll spans across both HR and finance, but with payroll being an employee-facing function, it’s no wonder why many believe it should belong in HR’s care.

On a day-to-day basis, HR professionals are responsible for a significant number of key deliverables. This ranges from recruitment to performance management and importantly, the bulk of items processed within payroll – changes to pay, salary, bonuses, employee working hours and benefit deductions. With the majority of payroll data originating from HR activities, does this warrant an element of control?

No matter the size of an organisation, there are bound to be a few payroll processing errors along the way. Cue a bombardment of phone calls, emails and office visits from multiple exasperated employees. Although unpleasant, HR will have a vast array of experience in employee relations, leaving them well equipped to deal with any general or specific queries centred around payroll.

As we have seen, there’s more to payroll than initially meets the eye. Accurately paying your workforce is one thing, but to keep up with payroll legislation is an entirely different matter.

Thankfully, HR professionals will be no stranger to the world of legislation. In using their expertise, HR will need to keep accurate personal records, understand workplace pensions, utilise audit trails, keep in line with the payroll and international legislation while submitting payment on time to ensure complete compliance.

Payroll holds a catalogue of personal employee and business data, and with so much sensitive information on the line, it’s paramount payroll is kept confidential. As expected, HR would be identified as the most appropriate candidate to prevent any data breaches and save the information from falling into the wrong hands.

Payroll in finance

On the other side of the spectrum, plenty of people believe payroll is a numbers-driven game, and who better to deal with numbers than your trusted finance team?

To ensure payroll is processed accurately, a clear understanding of accounting is needed to effectively perform functions such as reconciliations, posting to general ledger and taxation compliance. These are day-to-day responsibilities that finance intake to make sure the financial health of the organisation is intact.

Finance professionals are more than likely to have a detailed overview of the tax law, allowing them to act as expert advisors for the organisation if any taxation or compliance issues suddenly occur.

When it comes to payroll, organisations must have strong internal policies to avoid any financial risks, hence why audits of payroll financial data will need to be conducted on a regular basis. In deciding who this responsibility should fall down to, look no further than the financially educated employees.

According to Workest, payroll is the largest company expense by a long shot, at 68% of a company’s total overhead. In addition to this, 40% of workers stated that they would find it very difficult to meet financial obligations if their pay check was delayed by even just one week. These points showcase the impact a financial expert can have overseeing payroll, assisting in providing budgetary reports and consistently monitoring progress.

Does teamwork actually make the dream work?

A popular approach arising within more and more organisations, is for the payroll function to sit between the HR and finance department.

For finance and HR to be successful, both functions need to have full control over employee data. This will be the key towards developing, analysing and implementing effective policies and initiatives that reduce errors leading up an employee’s final gross pay.

Confidentiality is certainly an area where the intertwined efforts of finance and HR will make a notable difference. The decisions made surrounding pay and benefits need to be enclosed within the organisation. Especially with GDPR in place, HR and finance need a solid, robust relationship. You need to ensure all data ranging from home addresses and phone numbers, to National Insurance details and salaries are kept secure and easily accessible when needed.

Adding payroll to the cloud

Regardless of your opinion upon payroll’s true home, the most essential element is to ensure your payroll data is hosted in a secure and accessible space.

Deloitte further delved into the world of payroll and found that 74% of organisations are already using or are implementing a cloud-based solution and 10% are evaluating moving payroll to the cloud.

By adopting fully integrated payroll software, accurate data is seamlessly communicated while a time-saving approach is presented throughout the build-up to your employee’s final gross pay.

Fortunately, Moorepay’s all-in-one HR and payroll software does just that. Our cloud-based platform has everything you need to onboard, manage and pay your people – all wrapped up in one easy-to-use system. After all, some things are just better together.

If you want to experience how an integrated HR software platform can benefit your business, book a free demo today.