Why payroll and HR need to work in partnership

I haven’t seen anyone from HR in two years,” a payroll specialist at a leading UK corporate was recently overheard saying at a finance conference. As the gap between finance and HR is supposed to be getting smaller, it seems startling that two functions which have huge common ground should exist as disparate elements, but it remains the case in many organisations.


Even with technology driving integration – and bringing potentially massive cost and efficiency savings – there is still a reluctance for the two sides to come together, and this is as much down to cultural differences as the practical aspects of the role.


Root causes


“There is an assumption that there is integration,” says Steve Foster, manager, HR business strategy, at HR software and services provider Northgate HR. “But while technology is providing a vehicle for them to start talking, in many companies there is still a chasm.”


So what is the root cause of the apparent apathy, tension or downright dislike that sometimes exists between the two functions? On paper, HR and payroll are inextricably linked from the moment a member of staff joins to when they leave or retire.


There are a number of reasons why the two don’t always enjoy as harmonious a relationship as they could. Chief among them is that they are different breeds of people with different skills. Payroll is highly technical – the profession has its roots in finance and accounting, and its individuals are slaves to deadlines and accuracy. HR’s role, on the other hand, is far less tangible. In short, the view that payroll deals with numbers whereas HR deals with people – end of story – still exists within some organisations.


Lack of appreciation



In many cases, it is simply a lack of appreciation of each other’s roles that creates this tension. Paying people on time and accurately may sound easy, but it also means understanding and applying complex areas of employment law and staying on top of the burdensome demands of the tax system. New pensions legislation and a trend towards adopting flexible benefit schemes just make the role more complex and strategic than ever.


“Some of the HR people who attend our workshops are surprised by the breadth of skills needed to do our jobs,” explains Maurice Cheng, chief executive of the Institute of Payroll Professionals (IPP), who is campaigning for chartered status for the payroll profession.


One of the key elements of a career in payroll is the constant demand for accuracy – both functions work under pressure to meet commercial business targets, but payroll often feels it more keenly than HR.


“Invisibility is the mark of success in payroll,” says Ian Sparrow, programme director at payroll services company ADP. “You can check timesheets 100 times, but if the numbers are wrong on a payslip, your profile is raised for all the wrong reasons.”


Work in harmony


Melanie Guy is HR manager at HR and payroll software and service supplier Snowdrop, but has also worked in payroll. “You rarely receive thanks for paying someone and for getting it right,” she says. “But getting a new starter’s pay incorrect or not paying them at all can undo all the hard work during the recruitment and induction process in an instant.”


While the two sides may not be natural bedfellows, the drive towards integrated payroll and HR systems means they must work more closely together than ever before. Organisations cannot expect to reduce costs and administration – the main driver for integrating the two – unless payroll and HR work in harmony.


In 2006, Snowdrop carried out a survey on the relationship between HR and payroll after it witnessed first-hand some of the difficulties that can arise if the two don’t work together.


It revealed that information delivery is often at the heart of the problem: more than 60% of payroll professionals believe HR doesn’t give them accurate information, while 54% think HR doesn’t keep them up to date. That said, the survey found both sides willing to work more closely together (96% in payroll and 85% in HR).


Patricia Taylor, director of HR and payroll service business at LogicaCMG UK, believes it is important that neither side has more influence and control nor should they become sidetracked or totally pre­occupied with their own data. “Each can be armed with their own data but the danger is they don’t talk about the business issues,” she says.


Both sides must also learn to be mindful of what is important to the other one. When organisations move to employee self-­service, for example, HR and payroll data need to be inextricably linked so employees have access to the most up-to-date information available. Similarly, a move to shared services may force HR and payroll data together into a single database.


Every aspect of it must be thought through, warns Foster. “Allowing staff to change bank details, for instance, is a massive political issue for an organisation,” he says. “Get one digit wrong, and payroll will turn around and say: ‘We’ll do it instead.'”


Getting the process right as HR and payroll come together is crucial. All too often, old processes are mapped on to new technology, which in many cases means opportunities are missed. “Payroll’s detail-driven approach can mean it’s not prepared to bend,” says Emma Taylor, a sales executive at Snowdrop. “HR has to be given the opportunity to be flexible.”


But what impact will increased integration have on the careers of HR and payroll professionals? Specialist recruiters in the field say there is only limited demand for hybrid HR/payroll roles, although some report job specifications requiring more integrated sets of skills.


Good integration


 


Some payroll specialists are using the trend towards integration as a way to move into HR, especially into areas such as compensation and benefits, where their technical knowledge can be put to good use. There are also smaller and medium-sized companies where the line between the two has always been more blurred because there is less scope for division of labour.


What HR should not underestimate though is that, like themselves, their counterparts in payroll take their qualifications and career development extremely seriously, and consequently today’s payroll professional has far broader skills than previously.


“Payroll has grown so much in complexity that payroll people now have the opportunity to train to MSc standard, which equals or surpasses training requirements for many of the best professions in the workplace today,” says Kim Miller, a pension payroll specialist at Compass.


She recently achieved an MSc in Payroll and Business Management, which was run in conjunction with the IPP at the University of Derby.


“Most payroll people are multi-skilled, which was seen as a drawback in the old days, but the beauty of this is that we can do many of the duties that HR carries out,” Miller says.


With so much emphasis on business partnership among HR professionals, they could do worse than to get closer to their counterparts in the payroll department. These roles are more skilled, complex and strategic than ever.


Case study: Tarmac


Integration success stories do exist, but have only come about after hard work and commitment on both sides. Stephen Funnell – now at steel company Corus Group – used to be UK payroll controller at Tarmac,co-ordinating payroll and nine HR divisions, serving 9,000 people.


Historically at Tarmac, it was a case of ‘never the twain shall meet’ as far as HR and payroll was concerned, but when they embarked on the path to integration, Funnell knew this had to change.


“One of the first things we did was to demonstrate the benefits of integration in pictures, creating flow charts of each stage,” he says. “This illustrated points such as information being inputted twice unnecessarily.”


A major issue when it came to selling integration to HR was reassuring them that they wouldn’t lose control. This often led to friction with payroll and finance, who questioned HR’s ability to provide accurate and timely data. But the business benefits in having integration far outweighed the problems, says Funnell, which were often brought about by a lack of understanding of each other’s role.


Working hard at linking up both sides helped to build this understanding and trust and erode misconceptions. Funnell ensured that all HR/payroll counterparts met each other. And when they were back in the office, there was a rule that if anyone had a problem, they couldn’t come through him. “They had to talk to their equivalent in payroll or HR, which forced them to discuss issues,” he says.


Another factor in successful integration was to build in key performance indicators to measure the performance of both HR and payroll. “Publicising performance proved to be the incentive that some people needed,” Funnell says.



 


 



 


 

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