The relationship between payroll and HR is strained at times. Zoe Cacanas of paymagazine finds out why and how amends can be made.
Merging payroll and HR into a single or integrated system seems a win-win move.
Fusing the functions can cut costs, avoid duplication, save time and preserve accuracy. Most importantly, in the words of Steve Morris, sales manager at Pyramid HR, which has offered a single HR and payroll system since 1996, a single system can slice costs by a quarter, forming a continuous chain of employee care from recruitment, appointments, payroll, expenses, to swipe-in-and-out time and attendance.
A recent survey by Harte Hanks for Northgate HR found that the impressive benefits have seduced 46% of HR departments who claimed to have already implemented integrated solutions, and the 33% currently planning to do so. And for 39% of HR departments, it was pitted as the most likely move to make this year.
But marrying HR and payroll involves people rather than mere functions. And according to Ann Fitzpatrick, sales manager at Northgate HR, one of the biggest challenges for software suppliers is the struggle to be the best of breed for both sides of the equation, especially when the two teams are essentially so different.
Fitzpatrick’s not alone in citing the differences between HR and payroll and the people behind them. “Culturally, there are very big issues we face,” she says.
Other voices in the industry concur: payroll people have been brandished computational in character, obsessed with accuracy, inflexible and unimaginative.
HR are lamentably inaccurate, disorganised, always late with information, too fluffy in their people-focus and all this because they’re too busy thinking about how to get into the boardroom. After all, a survey from Northgate recently showed that proving its value to business is a priority for 75% of HR people.
No surprises then that Steve Sunley, sales director at Grampian Software, has “definitely seen some clashes” between newly integrated HR and payroll, with 60% of newcomers to their single system previously operating separately.
Data input raises voices. Fitzpatrick says: “Payroll is a hard subject, for whom 100% accuracy is only average, while HR sees the bigger picture and wants to understand employee needs. HR doesn’t have the urgency and get the data to the system wrong, late, or not at all, according to payroll.
“Payrollers joke: ‘is there a pulse in HR?’ when it’s discovered that HR doesn’t know how many employees the company has. But what they may not understand is that HR has a natural reluctance to put something on a system.”
HR has their own grievances, too. One gripe is that payroll departments aren’t people-focused enough, and slow to grasp the concept of employee welfare.
According to Fitzpatrick, integrated systems have thrown up issues around data ownership, fuelling what could be perceived as a power struggle. “Payroll is starting to report up through HR instead of finance and in the view of some payroll people, they’ve been marginalised,” she says.
“I’ve got more payroll experience than HR and I still think that HR should own the data, largely because it needs to align itself to the raft of European legislation like the Freedom of Information Act. The power struggle has been won and lost,” Fitzpatrick adds.
Other commentators are not so sure. Sunley says that the ruler of the roost varies from company to company, explaining that if you have a strong HR director, HR will be stronger than finance; if you have a strong finance department, payroll will be in the ascendant.
Snowdrop System’s payroll consultant, Tony Price, agrees: “It doesn’t have to be a power struggle – you just have to decide who does what. ‘Payroll’s about rewarding people’, say some companies and put it within HR. Others say it’s about spending money, and put it in finance.”
Bringing a new perspective to a marginalised payroll, Sunley notes that some prospective integrated system clients have recently removed their HR function and are effectively looking to replace it with an integrated system.
Morris sees the fight for a foothold firmly in the past. “It was from times of old that never the two shall talk. There’s no longer a power struggle – that was the old school,” he says.
Could it be that the streamlining of communication with systems can ultimately save HR-payroll relationships, after some initial teething tensions?
According to Sunley, a single system means less need for communication – with one core employment record bringing the two teams closer together. “It’s the systems rather than bits of paper bringing functions together,” he says, adding that he has seen integration leaving teams friendlier than before.
Others press home the need for verbal communication at all levels, with Fitzpatrick saying that teams need to work together more than before, and are doing so, thanks to the growth of integrated systems.
The future spelt out by software providers is, perhaps predictably, more integration. Not so much in terms of the degree of integration between HR and payroll – products are as integrated as they can be, says Price – but in terms of number of companies choosing to fuse their functions.
There are organisations that aren’t keen yet. They may be unreceptive to the benefits of outsourcing because they feel they’re too small – the perceived benefits may be difficult to grasp. Or too big, with vast HR and payroll departments that simply never meet, sometimes divided between different parts of the company. This is no bar to outsourcing, says Price, with integrated solutions able to run across different divisions.
There will also be greater scope for employee data ownership within integrated packages over the next five years, freeing up low-value time for payroll staff. This may mean that payroll departments may not grow in numbers, but that they too will see the career development for which HR has long been ambitious.
“This will mean a different type of career development for payroll, who can turn from their keyboard to operational and strategic roles,” says Price.
Case study: Goldsmiths College
Sheila Anderson is payroll manager at Goldsmiths College in London, where HR and payroll are moving over to Grampian’s integrated HR and payroll system.
“Twenty years ago, integration seemed an alien process, she says. “For the last three years we’ve shared an accounting system and had two different payroll and HR systems. Now, we’ll share one system, with an interface into our accounting system. It will mean streamlining, less duplication, and lower costs – partly as the old HR system was written especially for the college.
“We always have to work together, whether you’re integrated or not. And it’s not a power struggle; it’s about workflows and processes.”