31 August 2011

A survey by UK business management and information systems provider, Advanced Business Solutions, reveals that opinion is divided as to where the payroll function should sit within an organisation. The majority of respondents do, however, agree that payroll needs to be connected with the HR and finance departments regardless of where the function resides. Advanced Business Solutions carried out the research with 79 human resources (HR) and payroll professionals from both the UK and the USA.

The survey reveals that 36 per cent of HR and payroll professionals believe that the payroll function should sit between an organisation’s HR and finance departments. 25 per cent state that the payroll function should reside within HR and 24 per cent believe that the function should be part of the finance function. The remaining 15 per cent of participants took the view that payroll should be outsourced to a third party payroll specialist. 

One of the respondents, a UK HR professional, who believes that payroll should be part of the HR function, states: “Payroll contains confidential and financial information and for that reason it should stay within HR.” In contrast, another respondent, a UK payroll professional comments: “Payroll is a big part of any department’s costs and so must be held under finance.”

Simon Fowler, Managing Director of Advanced Business Solutions (Commercial) says, “These findings highlight the uncertainty about the payroll function in general. As payroll naturally spans both HR and finance, it appears to be the precious orphaned child of an organisation – highly valued but without a clear home.”

Although opinion is divided as to where payroll should sit, the majority of respondents believe that the function is important to both HR and finance and should therefore be connected to both functions as highlighted by the following respondent: “…from an accounting standpoint it makes sense for payroll to be under the finance umbrella, but from a pure employee standpoint it is more sensible to have payroll fall under the HR function. However it really doesn’t matter as long as the functions are inter-related.”

Fowler agrees that it is vital that payroll is linked with both HR and finance and that having the right integrated software systems in place is a key enabler: “Payroll is crucial to both HR and finance and so needs to be linked with both functions. Integrated payroll, HR and finance software systems are vital to achieving this connected, joined-up approach.”

Fowler adds, “If payroll systems and processes operate in isolation from the rest of the organisation, the payroll function is not operating as efficiently as it could be. By duplicating data entry across the different payroll, HR and finance systems, this could result in administration errors and lengthy processes. A standalone approach to payroll also fails to deliver a single, holistic view of each employee which could result in ill-informed decision making."