Ask Addi P.: Is Payroll a Finance or HR Function?
Dear Addi P.,
I have been in payroll my entire career. Sometimes payroll is part of HR, sometimes it's part of finance — and occasionally it's a stand-alone department reporting directly to the CEO. My current organization is rethinking the role of payroll, especially with so much of it being automated with HR and payroll software. What do you think? Is payroll a finance or HR function in today's organization?
— Reorg in Raleigh
Things have really changed over the past 60 years as accounting started to be automated and payroll began to be processed with mainframe computers the size of an entire room. Payroll was an early profession to have much of the work automated because, while complex, payroll is based on a specific set of rules and calculations that can be coded and repeated.
With the right rules and data, machines can calculate wages and withholdings and then issue checks or make automatic deposits. It's faster and more efficient for both employers and employees.
So now that payroll professionals don't have to spend their days figuring out the right withholdings and hand-cutting checks, what do they do? Perhaps the better question is: What don't they do?
An organization's payroll professionals are unsung heroes. When payroll is done right, everyone takes it for granted. But if something goes wrong, you end up with extremely unhappy people and potential legal liability for making late payments or underpayments. There's a lot at stake in making sure people are paid the correct amounts on the dates payments are due and that those payments reach employees on time.
After that, the role of payroll professionals can vary widely depending on where they sit in the organization and what type of work the business does.
Finance Control of Payroll Works Well for Large Organizations
Payroll managers who are closely tied to the finance department often tell me that automation has freed them up to audit their data, keep everything clean and correct and ensure that they have the right information about the right people. These payroll professionals get extraordinary joy from a perfect payroll run where everything works and there are no glitches.
In large organizations and industries with a lot of turnover like retail, restaurants and even tech, making sure you have the most up-to-date information on current employees is no small task. Usually your HR and payroll software solutions will keep all the rules on withholding accurate and up to date. But even with that assist, keeping up with the life and career changes of employees is a huge job.
In large organizations and businesses with a lot of turnover, there's also a larger focus on reporting so that leadership can keep up with the volume of change and costs, and can start to anticipate needs. This is where finance and HR start to overlap, especially in talent acquisition and workforce planning.
HR Control of Payroll Makes Sense for Smaller Organizations
Some payroll professionals focus on the organization's people more than its payroll data. Senior payroll analyst for KinderCare Margaret Davis, for example, decided that she would start to give some workshops and classes to help people understand their paychecks and withholding and benefits decisions. She also loves technology and is always looking to make systems more efficient and secure.
In smaller organizations where there's less employee churn, there are often opportunities to educate and help employees understand the administrative processes of the organization, which is closer to HR than finance.
Another important consideration is how your organization uses data, what data should be integrated to provide new insights and how you might use HR and payroll software to provide analysis and reporting across the organization. As HR takes on the role of the keeper of people data, payroll information is often the starting place for insights about where, when and how people work, as well as what your organization looks like and how it could be transformed.
So the answer depends on what your organization does and what it wants to do with people, technology and data.
Addi P. is a digital character who represents the human expertise of ADP. The questions and challenges come from professionals who manage people at companies of all sizes. The advice comes from ADP experts who have a deep understanding of the issues and a passion for helping leaders create a better workplace. If you have a challenge you'd like to pose for Addi P., complete this simple form.
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