Finance or HR?

Traditionally seen as just dealing with numbers, payroll is becoming more people-oriented
By Jeffrey R. Smith
|Canadian Payroll Reporter|Last Updated: 01/14/2010

To many, payroll may be simply crunching numbers, issuing paycheques and reporting expenses. While these responsibilities are part of the job, the role of the payroll professional may be changing to the point where it might not be clear where payroll fits within an organization. On one hand, payroll’s concern with numbers and expenses would put in it in a close affiliation with an organization’s finance department but, on the other hand, it deals with employee matters such as pay and benefits. So where does payroll belong — HR or finance?

Payroll is a multifaceted area that has responsibilities tied to both departments. Accounting accruals related to statutory holdings, third-party payments, labour costing and GST remittances are all activities under payroll’s umbrella that are aligned with finance. However, items such as vacation entitlement, overtime, termination obligations and labour standards are also part of payroll’s turf and are more aligned with HR. Where this puts payroll may depend on the organization itself, says Steven Van Alstine, vice-president, compliance programs and services at the Canadian Payroll Association (CPA).

“There’s always been the age-old question of where does payroll fit within an organization?” says Van Alstine.

Research by the CPA shows smaller organizations usually have a payroll person who might have several duties that involve HR but in larger organizations there’s more segmentation where payroll is more independent. In these larger organizations, payroll tends to align more with HR, though logically it may be more tied to finance because of legislative compliance responsibilities and financial calculations, says Van Alstine.

A CPA survey for National Payroll Week in September that asked payroll professionals where their organization’s payroll department reported to revealed the ties to finance are strong overall. Out of 1,317 respondents, 667 (50.6 per cent) reported to accounting, while 399 (30.3 per cent) reported to HR. The size of the organization played a role in payroll’s location, as more than one-half of organizations below 1,000 employees had payroll report to accounting and more than one-half of those with more than 10,000 employees had payroll reporting to HR. The ratio for companies between those figures was fairly even.

Evolution from finance to HR

The evolution of payroll’s role within organizations may be shifting away from its traditional place in finance, however. Increased multitasking is leading to a fluid and dynamic role, requiring payroll professionals to be knowledgeable and up-to-date on changing duties within an organization. While this may indicate a trend towards more HR-related duties, payroll may in fact be moving towards independence, an indication of the cross-segmentation of its duties, says Van Alstine.

“I would hate for (payroll) to be pointed in one direction or the other,” says Van Alstine. “I see payroll becoming more independent within organizations because of the amount of responsibility. This is why payroll is becoming recognizable as its own profession.”

Payroll ‘HR first’ at Carswell

According to the CRA survey, 51 per cent of organizations with 500 to 999 employees have their payroll departments report to accounting while 41 per cent report to HR. Carswell, a Thomson Reuters business — publisher of Canadian Payroll Reporter — falls in this category but is in the minority. Its payroll group is an active part of the HR department, says Carmela Zappulla, Carswell’s payroll supervisor. Though the department works closely with finance through its bookkeeping and expenses functions, Zappulla sees her role as “HR first.”

Zappulla has had previous payroll jobs where her duties were strictly financial, there was no HR connection and her role was solely to calculate employee paycheques, but things have changed over the years.

“We’re evolving towards HR and becoming more of a customer service to employees,” says Zappulla. “There is much more interaction with employees, we care more for them and provide services for them.”

The perception of payroll’s place by others in organizations may also see it as integrated with HR, since the issues employees are concerned with that payroll handles are aligned with HR and not finance.

“I think employees probably see payroll more logically tied to the HR side when they look at issues of pay because finance has a lot of components that employees wouldn’t be concerned with,” says Van Alstine.

Though payroll is still more likely to be part of an organization’s finance department — with the exception of very large organizations — the CPA recognizes a trend towards the HR side of things. It offers a seminar and workshop, HR Fundamentals for the Payroll Professional, that helps payroll people grounded in finance learn about some of the responsibilities HR has and increase their cross-departmental value, says Van Alstine.

Seminars such as this one that expose payroll professionals to HR functions can help them deal with the evolution of payroll’s role, which for many is still officially attached to finance departments but is evolving into something more. While they still require the traditional payroll skills of number crunching and familiarity with statutory requirements, multitasking with demands from other areas of the organization make the payroll profession more fluid and dynamic, says Van Alstine, and more difficult to pigeon-hole as mainly concerned with finance. And some payroll professionals are embracing this evolution.

“Being part of HR gives you the whole picture of employee needs and I like seeing the whole picture of employee information,” says Carswell’s Zappulla. “Payroll is still number-heavy but there’s more of a connection to people.”

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