Whose baby? Should the payroll function be finance's ultimate responsibility or personnel's? There are good arguments to support both viewpoints, writes Ruth Prickett, but it really shouldn't matter as long as the two departments can work together to ensure an error-free operation.

Author:Prikett, Ruth
Position:Payroll Personnel Or Finance?

Payroll is where the distinction between finance and personnel blurs, so it is hardly surprising that there is an ongoing debate about which department should manage it. From finance's point of view, payroll is one of the most important areas of expenditure. From HR's side, it is a crucial part of the organisation's relationship with its people. Employees, of course, see it as the main reason why they turn up at work every morning. One thing on which everyone agrees is that, while nobody notices when payroll is working well, the consequences of a failure can be disastrous.

The way in which these interests converge means that payroll floats uneasily between the two departments. This situation has now been complicated by the increasing number of companies that have chosen to outsource payroll altogether (see feature, page wi), or to put the whole function into a shared service centre, along with other non-core tasks.

The debate has also highlighted the division between strategy and operational processes. While few finance and HR directors would fight to manage the labour-intensive data-processing side of payroll, they are likely to be far more protective about the strategic and financial controls.

"In my experience as an HR director and a consultant, payroll tends to fall under finance in Britain and under HR on the continent," says Martin Goodman, senior consultant at Watson Wyatt. "I don't think it makes much difference to people at the receiving end. As new technology encourages the development of shared service centres for all support services, where it falls will become irrelevant to most firms."

George Castlehow, operations manager, payroll and travel expenses, at Rolls-Royce, agrees. His company has just put in place the third phase of a process to make all its payroll data collection electronic and channel it through a single services centre (see panel, previous page).

"Where payroll stands depends on the flavour of the day. There are equally good arguments for both sides," Castlehow says. "Probably one day both functions will be united in one place, but at present in Rolls-Royce it is seen as money and is therefore likely to remain predominantly under the control of finance for the next few years."

The most important thing, of course, is that data is processed efficiently and accurately. New technology is making it much easier to dispense with the immense amounts of paperwork and inputting that was once an integral part of payroll...

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