Finance vs HR Payroll Responsibility—Which department should payroll be assigned to?

Recently we mentioned a local HR Manager who is conducting a feasibility study on finance vs HR processing the payroll and we promised you guidance on this sensitive subject. If you missed that article you can read it here

Although the base objective of payroll is to ensure that employees receive salaries/wages timeously, many functions form part of the processing. These can include:

  • Employee data, records and regular updates
  • Onboarding new employees
  • Salary/wage calculation per employee according to work contract
  • Local Labour Law and legislation compliance – knowing the laws and applying them
  • Variable calculations like bonuses, overtime worked, medical obligations, in-country taxes, savings schemes, loan repayments, expense claims, time and attendance, etc.
  • Stringent record keeping of pay-related matters e.g. leave management, gratuity/pension accruals, taxes (if applicable), medical insurance, Visa and passport renewal dates, attendance records, bank records, etc.
  • Generation of payments
  • End-of-service benefit estimates
  • Many reports e.g. auditing, accounting, financial, management, legislative payments and requirements, etc.
  • Analysis – comparative and individual – per department, across departments
  • Disbursement of earnings

You can add to this extensive list…

When one looks at the draft of every item required, it becomes apparent that not one department can be responsible for it all. Understandably, new business start-ups initially ‘do it all’ and it is normally the business founder that carries the load. However, the moment the business starts to scale up, or for larger businesses, it is necessary to allocate the tasks.

This is the point that OPS asks the question: “Is Finance or HR responsible for payroll?”

OPS recommend that both departments are accountable for various portions. In addition, they will require input and/or assistance from other business associates and divisions e.g. IT, C Suite management, line managers, etc. and vice versa – other departments and colleagues will require input from payroll, HR, Finance.

A ‘split’ that separates the functions into independent task forces that have minimal contact with each other, is counterproductive. Disastrous in fact.

What should you do if there is antagonism in your organisation over payroll responsibility? OPS suggest the following steps:

  1. Payroll, HR, finance, IT and related stakeholders make a decision to focus on two common objectives:
    • Employees paid on time and accurately
    • Constant improvement of company processes and cost efficiencies
  2. Discuss the various processes required to achieve these goals
  3. Strategise who is responsible for each portion
  4. Align your processes to work together
  5. Meet regularly to review what is working and what needs adjusting (we suggest a minimum monthly meeting after payroll has run)
  6. Collaborate to bring your company ever closer to the goals you are aiming at – don’t play the ‘blame game’

Still not sure how to resolve your (unique) issues? Need some advice? Contact us

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