Payroll

Guide

Does Payroll Report to HR or Finance?

Some organizations have their payroll services reporting to the HR and others to the Finance. For this reason, it is not really clear where payroll should sit within an organization, and why it should even matter. What is clear is that opinions are split as to where global payroll services should be reporting as this continues to be a topic of much debate in most businesses today.

From the HR perspective, many HR professionals know that payroll processing is one of the many deliverables required of their roles. Most organizations believe that HRs should handle payroll services; just the same way they handle recruitment, training and development, compensations and benefits. After all, payroll services affect employees’ welfare, just like everything else that HRs handles. Many businesses believe that when HRs handle payroll matters, employee confidentiality will be well managed.

Besides, HRs deals primarily with employee relations, so if there are any issues with the payroll, HRs will be able to handle it easily, quickly and effectively. Again, majority of payroll data originates from the HR department, therefore HRs are the best positioned to deal with payroll matters. After all, they handle all recruitments, terminations, promotions, unpaid leave, benefits and deductions among other activities.

HRs are also more competent in labor laws that govern employees pay, medical and leave benefits, things that form a big part of payroll legislative compliance, which place HR and payroll services together. They are also well conversant with the latest payroll technology trends.

From the finance perspective on the other hand, there are some advocates who believe that payroll processing should be handled as an accounting function within the finance department. The argument here is that payroll involves accounting functions and knowledge such as reconciliations and posting to general ledger, which are some of the core responsibilities of the finance division. There are also taxation issues on payroll, which means that finance professionals, will be at a better position to offer expert advice to employees and for the organization in general.

Generally speaking, strong internal controls automatically means that payroll is a financing job, since HR professionals are not well aware of the strict legal and audit procedures that payroll must adhere to for full compliance. Besides, considering that payroll is the largest expense for most organizations, it should report directly to the finance department for budgetary reporting and monitoring purposes.

With payroll management as the most essential business function in both small and large organizations, where it is positioned is important for the proper functioning of the business. The latest in payroll technology is making things much easier for most organizations as business can handle payroll services much easier and more effectively. Businesses these days are free to compare payroll service and payroll software, and choose depending on what is more favorable for them. A payroll service is basically an external company that understands and handles every aspect of payroll process on behalf of a business. Payroll software on the other hand is whereby the payroll process will be handled internally.

With the best payroll technology solutions in place, businesses will not have to argue about whether or not payroll reporting should be done by the HR or the finance department.

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