Human Resources or Finance, where should payroll live?
There is a long-lasting debate around whether payroll should be part of the Human Resources (HR) or Finance team within a business, and boy can in conjure up some spirited discussions!
Like nearly everything in payroll, the answer currently would be the proverbial ‘it depends’ and there is no real one size fits all solution. The decision in most businesses is generally based on one or more of these factors:
The Finance/ HR leadership in a business and their individual understanding of Payroll
The Payroll Manager/ Teams individual past experiences with leaders from either of these areas
The size of the organisation
The size of the payroll team
The expectation of the payroll team, and whether they are seen as ‘transactional’ or ‘service oriented’
Whether they sit as part of the main operational business or in a shared services model
But wait there’s more!
More recently this same debate has started to also include a third option into the mix, and that is whether payroll should be its own standalone function within a business, after all, payroll professionals are required more and more to hold a unique set of skills that go above and beyond what either of these professions tend to teach at university.
Some people hold a very strong believe that the only way going forward is for payroll to be a standalone function within a business, however I challenge this idea in the current Australian landscape (but before all these passionate people start flooding the comments, please read on, we really are all on the same side here!).
So why not their own Function?
Currently, there is a significant variance to the experience and capabilities that exist within our current payroll leaders. Personally, I just couldn’t say that every payroll manager I have met or worked with is currently in a place where they could be a standalone or executive manager, reporting directly to a CEO and managing the whole inter-departmental relationships that would be required.
I also can’t agree that every size business can justify this type of a structure. It just does not make sense for a business that has a payroll requiring just a couple of people to add an executive manager to oversee that small team, nor can I see a CEO directly managing the day to day requirements of the payroll team. In those cases, they need to be put into one of the existing streams, and the natural choice generally lies between Finance and HR because of the alignment payroll has to each of these, but to be fair, I have seen payroll report to nearly every stream of a business including Corporate Administration, Operations, Legal and all manner of other alternatives.
Unlike our HR and Finance leaders, there is currently no obligation for a payroll leader to have a tertiary education that formalises any baseline on their understanding of the legal, operational and ethical obligations that they should have within the profession. Payroll leaders are not expected to be a member of a professional association that has a recognised code of conduct and professional development framework like that of the CPA for accounting, or the CPHR for practicing HR professionals that businesses have come to rely on to stand for a certain level of past and ongoing education and professional integrity.
So how can we change that?
We have already started making progress in the right direction, but there is still a lot to be done for payroll professionals, and therefore the payroll industry to gain that same level of recognition from the broader business community.
As individuals, we need to continue to take charge of our own professional development and hold ourselves (and each other) to a high standard of education and development within the payroll space so that we can be seen by business as the true experts in payroll.
As businesses, we need to look at our internal support for payroll teams and recognise that there is a unique set of skills separate to your HR and Finance teams that needs nurturing and support. We should be encouraging and supporting our teams to seek the education and development opportunities that are now available to us and to start seeking it out in new payroll staff we are introducing into our teams.
As professional associations, we need to continue to develop the range of education and development opportunities for payroll and payroll leadership as well as continuing to provide the profession with support on a day to day basis, be it updates on changes affecting the industry, advocacy within the business community or the access to personal and online resources for members. Personally I would love to see us work towards the introduction of a minimum competency requirement, as well as a code of conduct for individual (as opposed to corporate) membership status.
There may be a long road ahead of us, but as John Heywood once said, “Rome wasn’t built in a day” which is true, but every brick laid was a step in the right direction.
Gemma McDonnell-Mossop
Independent Payroll Consultant
If you would like to read more about payroll in Australia, then keep and eye out for more by following Payroll Edge Consulting. To contact us and arrange a free one hour consultation on whether we can help you reconcile your payroll family, contact us at info@payrolledge.com.au