Organizational Alignment of the Payroll Process

Introduction

Historically, the alignment of the Payroll function ^[1] has been debated among HR and Finance, and in some cases Treasury, as to where it belongs. Some argue that synergies with HR provide for the best fit, others state that Payroll is a Finance function because it requires analytical skills consistent with higher level accounting responsibilities, and others place the function in Treasury, often as a response to a problem or issue when Payroll was managed in either HR or Finance.   With the rise of Shared Services during the past 20 years, with designs that include multi-functional Shared Services, Global Shared Services, Global Business Services, and Integrated Business Services, the organizational alignment possibilities for the Payroll Process have increased dramatically. 

Payroll is a process that, by definition, touches every employee in a very significant way.  With complications that include local and federal regulations, tax withholding requirements, garnishment processing, and expatriate employee complexities, having a high-quality payroll process are critical to the success of any company, regardless of where the Payroll process reports.  The question is whether or not there is an organizational alignment option that best supports superior outcomes for the Payroll Process at your company.

iPolling^TM Results Review

Recently, Peeriosity’s iPolling^TM was used by understanding the range of organizational alignment options member companies use for the Payroll Process, and whether or not changes to the organizational alignment for Payroll are expected within the next few years.  Responses were posted in real-time, with visibility to company responses available to all Peeriosity members, allowing for direct communication with peers using Peeriosity’s integrated Peer Mail^TM capabilities.

To the question of what is the current organizational alignment of the Payroll Process, 48% responded that the Payroll Process reports into Finance Shared Services, with 24% responding that the Payroll Process reports into HR Shared Services ^[2], and 14% selecting Global Business Services.  Here are the details: 

 

To the question of whether or not a change in organizational alignment for the Payroll Process was expected within the next one to three years, 61% indicated that such a change was not likely, with only 13% indicating a change was either likely or very likely.  Interestingly, 26% responded with “not sure”, suggesting that for a sizable number of companies, changes to the organizational alignment for the Payroll Process are still very much a possibility.   

Here are some comments from responding companies:

• We just recently moved Payroll into our GBS HR organization.

• Varies by region. Latin America and Europe sit in GBS as Hire-to-Retire teams. In North America, Payroll rolls up to Finance and in the Asia Pacific, Payroll is managed locally.

• Payroll Operations is part of Global Business Services – Finance which rolls up into Global Business Services. ^[3]

• While technically reporting into Finance Shared Services, Payroll is a shared HR and Finance organization ^[4]. 

Closing Summary

With Payroll as one of the critical processes of any company, selecting an organizational alignment for the Payroll Process that provides the optimal supporting structure to ensure the highest quality and effectiveness is critical.  While many options “might work”, making the right selection isn’t trivial, and the impact on Payroll employee morale, and every employee who touches the process, should not be underestimated. 

What is the current organizational alignment of the Payroll Process at your company?  How likely is it that the organizational alignment for the Payroll Process will change at your company within the next one to three years?

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

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“iPolling^TM” 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 Mail^TM, members can easily communicate at any time with others who participated in iPolling.