How to better integrate HR and payroll

27 Feb 2020 By Mandy Chapman

Whether payroll sits within finance, HR, or on its own, the two departments must work together to develop a single end-to-end process, says Mandy Chapman

A recent study highlighted that senior people often can't see the most pressing problems their teams face every day. While frontline staff between them see 100% of the problems, middle managers only see 74%, team managers 9% and senior executives just 4%. Poor integration of people, processes and data creates challenges at a front-line operational level. Intelligence and awareness of the problem is not reaching the people who need it most.

Nowhere is this better illustrated than in the age-old HR/payroll disconnect. It’s an ongoing debate: should payroll sit within finance or HR? Or neither? Organisational structures, processes, business systems and strategy will all have an impact. However, whatever the specific circumstance, there are some best practices you should consider introducing to ensure compliance, control and accuracy across HR and payroll.

Rolling out an approach

A lack of integration and automation of process is always problematic. Think about a new starter: one of the first things they receive is their pay. To ensure this is accurate, payroll will need to know their contact details, salary, benefits, allowances and deductions. All that information will need to be generated in HR and understood and used by payroll. Data needs to flow well to do this. Unfortunately, different systems talk in different languages, often the approval paths don’t work, or there is too much reliance on legacy processes.

So how can businesses address these problems? It’s about awareness – senior management needs to know there’s a problem and work to resolve it. They need to bring the right stakeholders into the room to debate the issues. It is also about integration. By ensuring you have either a single HR and payroll solution which holds one version of people data, or you have a robust data interface between systems, you can reduce errors and costs.

Collaboration is also key. HR and payroll departments must work together to develop a single end-to-end process and break down barriers. Collaboration must also, however, extend more widely across the business as a whole. Technology and migrating from manual to automated systems are key.

Paper processes, emails, and in-house developed systems are all tools that organisations have used to try to capture HR data, but this approach is error-prone and costly. We also know the majority of data that affects payroll is sourced directly from employees and managers, but we also seem uneasy about ‘devolving to source’.

This may have come from the misconceived notion that this is ‘HR data’. Getting to the root of these perceptions helps ensure you have buy-in from across the organisation and can start to improve ways of working. Most employees just want easy access to data and to book leave, request a payment and view their payslips.

The key here is to involve those affected in what is a business process – we must stop thinking about these as HR issues or HR processes. By thinking of them as business-wide processes, we also improve visibility.

Data transformation

The key risk in not devolving to source, is HR then has limited ability to make rules-based input and exert control at the point at which the data is changing. The effort in HR and payroll is then more about checking, querying and re-keying data. Empowering employees and managers to enter data directly, which then goes through an appropriate approval route, will have a positive impact on the employee experience. Positioned correctly and communicated clearly, this can also free up time in HR and payroll teams and across the business. 

Many organisations are using modern HR systems or robotic process automation to accomplish this, but it is important to take a ‘lean’, business-facing approach, which will ensure the outcomes are visible to key stakeholders across the business. 

Payroll as a value generator

We are all aware of HR’s ability to add real value within an organisation, but payroll’s strategic and value-adding function can often be overlooked.

Imagine a proactive service focused on informing and pre-warning individuals of changes to their pay – for example, their tax code changing, their sick pay coming to an end… And such a service could free up time to carry out extensive checks; reconciliations and reporting; audit and compliance; and focus on employee satisfaction. All these things can have a positive effect on people and the bottom line. 

Ultimately, HR and payroll will always be intertwined. But understanding and enhancing the strengths and opportunities of each will give your business an organisation-wide advantage.

Mandy Chapman is general manager at HRCubed

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