Who's the boss?

With HR evolving to become a more strategic role, Sabrina Zolkifi finds out if payroll should remain under its care or sit under a separate function.

The past couple of years have seen the HR function gain a stronger voice at the table. With HR practitioners now involved in business alignment goals, the more administrative roles of the function are being outsourced or managed by other divisions.

However, payroll remains in limbo for many; despite being a transactional function, compensation is increasingly being pegged to performance.

Kylie Thomas, regional head of human resources and payroll at Michael Page, says because HR are closer to the people within an organisation, she believes payroll sits under the HR function easier than it does under the finance.

“CEOs and CFOs are really starting to pay HR the credit it’s due and the directors are really starting to understand HR can add more value than being in an administrative function,” she says.

Shirley Ang, HR manager at Belgarath Investments, agrees, adding payroll is no longer just an administrative function.

“Paying out right goes beyond the pay check line. This leads to happy employees rather than grumpy employees knocking on the doors of HR,” she says.

Thomas also says it makes sense from a practical point of view because of the way HRIS is structured these days.

For practicality’s sake

“HRIS are HR systems with payroll, as opposed to payroll systems with HR these days,” says Thomas.

But not everyone is convinced. Hans Han, head of compensation and benefits (C&B) at Huntsman APAC, says payroll may be better off managed by the finance division, as it requires technical competencies, especially in larger organisations.

This, coupled with the fact that not a lot of HR practitioners are armed with financial knowledge, is why Han believes payroll should only be HR’s responsibility in the infancy stages.

“Payroll and C&B focus more on the front end portion about what is appropriate for salary and in terms of whether it’s competitive. Yes, those discussions will involve HR, but it doesn’t necessarily mean that HR would have to do the payroll portion in order to get the other pieces done,” he says, adding moving payroll to finance will allow HR to “focus on the people”.

This is something Thomas agrees with. At Michael Page, while the HR function is responsible for providing advice on salary benchmarking, market rates, as well as working closely with management to manage details such as salary increments, there is a team specifically in charge of payroll.

“Our payroll team are quite specialised in the sense that they are able to provide advice about taxation and package structures to HR. They may be dealing with our accountants to get that information, but they are the mouthpiece of all things salary,” Thomas says.

Ang expects this direct need for information to be one of the biggest challenges HR will face regarding payroll in the next few years.

HR has to be on their toes to know the changes set in by local legislation and how that impacts payroll, and also how to manage the different tax regulations for individuals.

Shirley Ang, HR manager at Belgarath Investments

But it is also on that note that Ang says payroll still needs support from more than one business unit. For example at Belgarath, which is the franchisee for Chili’s Grill and Bar and Sarpino’s Pizzeria, it is critical for managers to make sure attendance records are accurate and pay is rolled out accordingly.

“Imagine an employee who has gone absent without official leave, and HR was not notified on time to hold the salary to clear the staff’s income tax. In the case of a foreign employee, it could pose compliance issue on the employer’s end,” Ang says.

Despite supporting the idea payroll should sit under finance, Han says Huntsman’s Singapore payroll function is still the responsibility of HR.

“It’s a legacy issue. Huntsman grew through a few acquisitions so as a result, there are difference finance organisations,” Han says.

“In Singapore, there are three or four different finance entities, but there’s only one HR serving the different businesses,” Han says, adding one reason he believes HR is still responsible for payroll in Singapore is to avoid cross-division sharing of confidentially employee remuneration data.

The big migration

For other companies in a similar situation to Huntsman who are looking at migrating their payroll function to finance, Han says the first thing that needs to be created is an independent finance function, which will oversee payroll and have the right set of skills and tools needed.

“One aspect obviously is the importance of having a good HRIS system that any salary changes or anything affecting the salary is updated into the system in a timely manner,” says Han.

“For finance, it’s about being able to receive that report on a regular basis be it monthly or weekly to ensure they capture any changes.”

Thomas says companies making that divide might find their HR leaders relieved because “we aren’t necessarily numbers people”.

But she says it is important for companies to be clear on where they’re at with their growth before making that divide.

“Generally speaking, we’re probably heading into an environment where companies are becoming more aware of the options that you can take in terms of specialities within the field, but I do think it does heavily rely on the structure of the organisation and what value they place within their respective support teams,” Thomas says.

Thomas says in the case of Michael Page, its operations in individual countries in the APAC region are not big enough to warrant one payroll professional per location.

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One of the biggest challenges HR currently faces with payroll is striking a balance between sales and operations, and HR documentations.

“Getting the line managers to realise that it’s no longer a paper production activity but rather the impact of getting information right and timely is crucial and goes a long way,” Shirley Ang, HR manager at Belgarath Investments says.

Another challenge HR faces is technology. Kylie Thomas, regional head of human resources and payroll of Michael Page, believes a lot of the payroll systems available are not APAC-centric.

She says as both HR and payroll become “more evolved and respected” as business areas, “technology hasn’t caught up with our expectations yet”.

“It’s moving in the right direction, but I don’t necessarily think for a regional business there’s a lot of options of what our technology can look like,” Thomas says.

Michael Page is also facing challenges in achieving flexibility in payroll for their contract staff.

Lastly, Ang says companies must make sure there is blanket control over payroll across the entire organisation.

“Control is the key as if the company wants to work on a single global HR and payroll system albeit the challenges in volume, variation of languages and cultural practices,” Ang says.

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Case Study: Belgarath Investments