HR and Payroll: Putting the Pieces Together
Alex Margolin| Jun 20, 2019
The Human Resources and Payroll departments may have different functions, but they are linked through the employees they recruit, hire, and compensate. While Payroll is responsible for making the payments and calculating the taxes that need to be withheld each month, HR keeps track of worker hours, salary increases, financial incentives, vacation days and other elements that show up in the actual payroll.
All of this information needs to travel efficiently between the two departments so that Payroll has the information it needs to make sure workers are paid correctly and on time. And HR is there to create a verification safety net to ensure that the payments are in line with the budgets allotted to them.
That symbiotic relationship thrives when both departments share a common sense of purpose – the idea that they are fulfilling two different aspects of the same function. But all too often, the two departments see themselves as separate entities, each hampered by reliance on the other.
Common Problems Between Payroll & H.R
Part of the problem is the difference in personalities between Payroll workers and HR staff. Payroll focuses on concrete numbers and precise calculations. Payroll managers lay awake at night worrying about figures that don’t add up to the last penny. HR focuses on the needs of the workforce. They engage with abstract concepts like loyalty and motivation. Differences in approach are a natural outcome of their different orientations.
The bigger problem, however, is the haphazard system often created by manual reporting. The systems still in use at most companies relies on workers processing numerous spreadsheets by hand, bringing the information together through their own calculations. These labor-intensive manual systems take up enormous staff time and remain rife with potential for error and inefficiency.
To make matters worse, the data collection systems used by each department are often different from one another. Without a centralized data center, each department will choose an ad-hoc system that fits the way it works. Reconciling different systems can make the job even more difficult and create increase the disconnect between the departments.
Sharing data in the modern age when it’s collected manually – sometimes even using pen and paper – creates distance between HR and Payroll, and that creates inefficiency. Closing that gap can take a burden off both departments and save the company time and money.
Payroll – Finance or Human Resources?
Bringing Payroll and HR closer starts with understanding how many companies relate to Payroll. Today, some companies put Payroll under Finance and some under HR. There is no consensus on which department should be overseeing payroll.
It often seems like payroll is the unwanted step-child of both departments – tolerated out of necessity but viewed with suspicion as a potential hazard. Consider how often payroll managers are praised for getting payments right, compared to how much blame they get when something goes wrong. It is a thankless task that only gets noticed when there is a problem.
Payroll is the biggest single expense at virtually any company. And since it involves transferring money from the company bank accounts, withholding necessary taxes, and calculating financial benefits or bonuses, it would seem to be a function of the Finance department. That’s where the tax experts sit, and that’s the department that oversees the money that goes in and out of the company coffers.
At the same time, those payments go to people within the company, who are the responsibility of HR. The salaries of the workers were negotiated with HR, and those bonus payments are part of HR’s effort to keep the workforce motivated and the workplace attractive to potential new recruits. Add the element of data privacy, and it seems that payroll belongs in HR as much as in finance.
So which department should oversee payroll? While there is no clear answer to that question, judging by what’s happening in the real world, it breaks down by size of the company. The bigger the enterprise, the more likely it is to put finance in charge of Payroll. Since large companies are more taxing for a manual payroll system, especially if those companies have workers overseas. It’s up to finance to check the numbers.
That approach makes sense for big companies but it could widen the gap between Payroll and HR, removing the sense of common purpose that could emerge when the two departments share responsibility for Payroll.
Bridging the gap is easier at small or medium-size companies, which are more likely to place Payroll in the domain of HR. While payroll could be complicated at any company, especially in the age of global expansion and PEOs, keeping HR involved allows the department to learn more about each employee and find ways of improving the worker experience.
In a manual system, however, the challenge of coordination remains as strong as ever. As long as there is no centralized system aligning the two distinct but essential parts, bridging the gaps is nearly impossible, to the detriment of both departments.
HRIS as a Step Forward
Companies tend to look for ways to consolidate functions in order to make them more manageable. One popular tool is called the Human Resource Information System (HRIS). It is helpful for tracking the life cycle of an employee. All employee data is entered into the system, and the system can track important information such as the employee’s attendance record, performance, and fluctuations in salary. For example, one particular employee will be so good at his job that he will get a bonus, and then a promotion to a new job with a higher pay. Being able to track that employee’s success at the company will be available in one glance with HRIS software.
While all companies can benefit from HRIS, the high cost of the program makes it more likely at be used at companies with 50 employees or more. The system has separate modules for all of the different functions of HR, including onboarding, which includes models of pre-first day preparations for bringing in a new employee, legislative compliance, and goal setting for the probationary period. Other modules include Time and Attendance, which features software for tracking employees and time clock management; Benefits Administration, which has detailed plans available for workers; and Absence and Leave management, which allows workers to request leave, keeps track of scheduled absences, and tracks vacation time accrual.
These modules can save a great deal of time when it comes to formatting payroll, since most of the information necessary is already available in an easy view. This form of consolidation brings the payroll function back to Human Resources and aligns the two departments in natural and intuitive way for both departments.
The Automation Solution
Beyond HRIS, which helps track many payroll functions, but does not actually process payroll, the best solution to bridge the gap is to bring the two departments together through automation, linking all of the different functions into a single, efficient system.
In an automated system, payroll and HR would be brought together digitally. Changes in payroll, tax code, or benefits would be configured into the automation system. In an automated system, the payroll manager is responsible for overseeing the process and ensuring that it aligns with the company’s goals. The manager could report to either HR or Finance and it would have no effect on the coordination between the two departments.
Papaya Global’s automated HR/Payroll software brings all of the payroll information into one place, making it easy for find actionable data. It provides business intelligence reports updated in real time to help manager see how much they are spending per worker, in every country they have employees.
Automation also takes the burden of legal compliance off of the shoulders of the company leaders. And in an era when GDPR compliance is seen as a crucial to global business, the Papaya Global platform ensures that the strict regulations are followed to the last detail.