Payroll - is it really something for HR to be concerned with? A decade or two ago, the answer would have been a simple 'no'. In most Asian companies, payroll was seen mainly as a compliance function, within the finance arena. Performance was not as closely connected to pay as it is today, so there was little reason to include it in any compensation and benefits strategies, isolating it even further from HR.
However, over the years, some functions and roles of HR and payroll have overlapped. This change can be attributed to a shift in attitudes towards employees as individuals, rather than mere digits. In today's business world, a salary indicates more than an employee's job worth. It also incorporates their chance for career progression, the value of their contributions and their longevity within the organisation.
Vincent Lee, Senior Executive, Payroll, Aetos Securities, says cooperation between the HR and Finance departments is important, particularly when HR considers the large spectrum of tasks that payroll workers have to keep up with. There has to be alignment with government-mandated policies (in Singapore, these would include the Central Provident Fund and income tax laws) as well as company policies. "Payroll is always working towards many timelines," says Lee. "Thus the flow of information is crucial."
He says HR needs to also appreciate the accounting aspects of payroll - which can have a significant impact on the overall financial health of a company. Payroll typically goes unnoticed until there is a flaw in the system. If that happens, the results can be disastrous for the company's bottom line, and its reputation. Lee says the far-reaching consequences of a botched payroll should never be underestimated. It might not seem like something that would affect recruitment but consider this: companies known to pay salaries late or miscalculate expense reimbursements will invariably draw suspicion from jobseekers.
Karen Paterson, Group CEO of Patersons Global HR and Payroll, says this is one of the most important factors behind the new interest in payroll issues. "If payroll is silent, it's good," she says. "If it's bad, there is noise in the organisation."
Paterson likens the payroll function to tasks surrounding relocation. It is expected to go smoothly but one hiccup - like furniture going missing, or flights not being booked - can go on to derail many other plans. Therefore, HR and payroll need to work together, and concurrently, to ensure smooth execution of what is ideally a fairly routine process.
Alignment
Some professionals believe that the biggest payroll challenges result from breakdowns in communication. While seemingly easy to fix, these problems bring up questions about the roles and responsibilities of both HR, and the Finance department where payroll typically resides.
One typical problem could be a discrepancy in an employee's pay. As the information is sensitive, and may lead to questions about leave taken, special payments or even performance, payroll staff often direct employees to approach HR. Indeed some employees feel more comfortable approaching HR than the accountants. HR is expected to possess the people skills and tact to deal with conflicts but this doesn't mean that they are trained to handle these specific issues.
According to Cindy Ong, HR Manager, Grundfos, this crossing of lines is a common issue which can lead to conflicts in the organisation. Such problems are prevalent because payroll can neither fully reside in one department or another. Striking a balance is the challenge.
Ong says payroll is only one aspect of a wide spectrum of issues in the HR department, whereas Finance departments typically have a larger responsibility towards it. Therefore it makes sense for the accountants to continue being the payroll specialists in an organisation. She says the benefits of having only a single channel for payroll issues is a powerful incentive, but organisations need to be clear on where the duties lie. "If there is no proper segregation, it defeats the purpose," she says.
Of course, if the payroll function is to be the complete domain of the Finance department, this will mean accountants will have to take on the human tasks of dealing with staff pay issues. They will need to become more familiar with all of the policies that Lee mentioned; and not just in terms of how they relate to calculations.
Ong says the common assumption that payroll is a routine task ignores this important human side of the equation. "We think, as long as they know how to count, that's sufficient. But they (payroll workers) should be trained to take care of administrative functions as well."
Ironically, this separation between departments will actually require an initial involvement from HR. Since HR professionals are apt in dealing with people and familiar with the organisation's employee culture, they can often impart their expertise through in-house training. External training can also be used but HR will still have a part to play; providing contacts and discerning the most appropriate training for the company's needs.
Automation
If a company decides against a segregation of departments, measures must be taken to ensure a strong integration between HR and Finance. This will ensure minimal lapses in communication and chances for human error. In her experience, Paterson has found that people who process payroll - be they HR professionals or Finance staff - are not always holistic about the tasks, sometimes leaving major gaps. "There needs to be an ability to step back, look from end to end and define processes," she says.
While it's debatable that all processes become easier when automated, a specific technology for payroll processing is worth looking into. Certain software products provide a hassle-free experience for HR and employees, but even simple database management can prevent some of the costlier mistakes. Paterson says companies should put HR systems and payroll on the same database so they are in sequence.
An effective and comprehensive technological system can alleviate HR's problems by giving ownership to employees. For example, employees can be responsible for processing their own medical and vacation leave via the organisational intranet. "All the control points are in place," Paterson explains. "If employees forget to use the self-service, it's their fault."
This method differs from the conventional way of doing things, whereby employees fill a form and give it to HR, who pass it on to the Payroll office. If the service is automated, staff simply log on, fill out the necessary information themselves, and then a line manager approves it online. There's less hassle for third parties and fewer opportunities for miscommunication, Paterson says.
She says her own experience running payroll for a bottled water company shows how easily automation can save money, time and frustration. Depot staff were paid bonuses based on how many bottles they delivered. Their regional managers, who were responsible for collating this information, were always late in passing it on to HR and the results were always inaccurate. This meant disgruntled staff and ongoing problems for both HR and the finance department.
An automated process that the staff could handle on their own gave them responsibility for their own data. "Automation helps them to focus on doing the right thing," says Paterson.
Of course, there is always the temptation to pack all payoll functions into a single bundle of 'work' and then outsource it an external service provider. Although this seems like an ideal solution, Paterson says it is tantamount to sweeping a pile of dirt under a rug. "If you're looking at outsourcing, you're not just chucking it over the wall; you're passing on your problem. It still results in inaccuracies," she warns.