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Benchmarking HR Shared Services Organizational Structure and Why Context is Important

Payroll is a process that is guaranteed to touch every active company employee in a very tangible way, yet it is also a process where leading companies have taken a wide range of approaches to deliver payroll services.  For example:

  • Approximately 50% of all large companies have Payroll reporting into Finance, with the other half reporting into HR.
  • 60% of companies primarily process payroll themselves, with 40% outsourcing all or a significant amount of the activities.
  • About 50% use a country-by-country model, with the other 50% using a combination of multi-country or regional centers with almost no organizations centralizing to a global center. 
  • When it comes to using a shared service model, the results are similar, with slightly more than 50% including Payroll in Shared Services and the balance either highly centralized or primarily decentralized by country or business unit.

In addition to being a mission-critical process, and if Payroll is also arguably the most common corporate process, why is it that there are so many different approaches for how it is delivered?  To answer that question, you need to go beyond top-level benchmark results to understand the context of individual company experiences.  

To better understand the differences between individual companies, an iPollingTM question asked, “What best describes the Payroll Services organization within your company?” with one of three responses selected – “Shared Services”, “Centralized” or “Decentralized”.  Here are the top-level results:

 description of payroll services organization in your company benchmarking payroll structure ipolling peeriosity

The poll generated a lot of discussions, allowing participants to understand the context of responses by providing full visibility to who made each comment.  Here are “the Top Ten” comments that provide context for how iPolling participants answered the question:

1.      We have “Salary Employee” payroll processing centralized in the US for the US and Canada. Our production employee payroll processing is done locally for large manufacturing plants. Back-end processes, including direct deposits, benefits funding, garnishments, and tax compliance for all payrolls are centralized with US salary payrolls. We have plans to leave timekeeping at the plants for production workers but bring payroll (gross to net) into the existing salary shared services. Several different models are used outside the US and Canada.

2.      US and Puerto Rico are centralized within Shared Services in the US. EMEA is not centralized.

3.      We run SAP payroll and have had a payroll in our shared service center since 2008 when the center was created.

4.      We have a hybrid model where US payroll is centralized but not within a Shared Services team. The rest of the world is decentralized to individual operating locations due to country and/or local requirements.

5.      Due to the nature of our business, payroll processes are decentralized by country.  Varied legal and labor laws in different countries make it difficult to centralize payroll processing for a global organization like ours that operates in many countries.

6.      Payroll is outsourced across EMEA but time and GL maintenance are local.

7.      Varies around the world, but mostly in Shared Services with Finance processes.

8.      Centralized in Shared Services are employee/government remittances and most payroll master data. Compensation strategy and payroll master data for some business units are outside of Shared Services.

9.      Payroll is part of Shared Services and is responsible for ensuring time and labor are recorded and transmitted to the outsourced pay processor. Other payroll activities, such as off-cycle pays, adjustments, review, and reconciliation of W-2s, reside with Payroll in Shared Services.

10.  All Employee payroll processing is centralized. Some data entry for Production employees is entered locally for some of our locations. All other processes, including direct deposits, benefits funding, garnishments, and tax compliance for employees, are centralized within Shared Services under HR. Timekeeping administration for production employees is managed locally.

While Payroll is a process everyone has, there is no single organizational structure or sourcing option that can be regarded as an absolute best practice. As indicated from the iPollingTM and the accompanying comments, the peer-to-peer discussion is critical to gaining an understanding of “the why behind the what” that, in many cases, is only suggested by benchmark results.

What organizational design does your company use for Payroll Services?  When you benchmark your Payroll processes, are you able to follow up directly with peers?

Who are your peers and how are you collaborating with them?


1 “iPollingTM” is available exclusively to Peeriosity member company employees, with consultants or vendors prohibited from participating or accessing content. Members have full visibility of all respondents and their comments. Using Peeriosity’s integrated email system, Peer MailTM, members can easily communicate at any time with others who participated in the iPoll.


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