Sleeping with the Enemy: When HR and Payroll Make the Worst Bedfellows

A dear friend is starting a new job today as an HR Manager – joining a company with ~300 employees. It’s a cool opportunity with a cool company and she’ll be doing all the typical human resources stuff – workforce planning and recruiting, total rewards, employee relations, compliance-stuff, and…payroll.

That’s right; she’s in one of those organizations where payroll rests firmly in HR’s domicile. A place where performance management, cultural affinity and employee engagement snuggle-up side-by-side with tax withholding and garnishment notifications.

This is pretty common. It’s also hella stupid.

While HR and payroll need to work together, their responsibilities in ensuring people are paid correctly should be separate and distinct.

The payroll function (calculating time worked, overtime, reimbursements, retro pay, tax withholding, wage deductions, etc. etc. etc.) is, by its very nature, an administrative finance process. Payroll folks track and verify all the payroll expenses to ensure they are paid, recorded and reported properly. The HR function, on the other hand, should serve as the architects of policies, process and workflow and, in conjunction with payroll, ensure there is adherence to both state and federal wage and hour laws/FLSA regulations.

But the same person (some hybrid HR/Payroll staffer) should not be the person in charge of entering, processing, running and verifying payroll. For both financial and human reasons.

The Finance Side

On the finance side there’s a little thing called “internal controls” – designed to control risks in the organization. At the departmental and process level this means, for example, having Person A (HR) enter information (new employees, wage adjustments, deductions) and then having Person B (payroll) verify via source documents, ascertain accuracy, and finalize the process. Further internal controls may then include Person C (the big boss) doing a final review and verification.

This, of course, ensures accuracy and alignment with internal policies but also makes sure that ONE person does not have the power to fraudulently hire/pay fake employees but it also ensures there is a secondary verification step to alleviate simple human errors.

The Human (HR) Side

Employees get justifiably upset when their paycheck is incorrect. Bob was supposed to see his new pay rate reflected on his paycheck and it wasn’t. Trixie’s paycheck shows medical/dental deductions when she declined coverage. Susie took 32 hours of sick leave during a pay period but rather than paid leave her paycheck reflects 32 hours unpaid. Bob, Trixie and Susie are pissed. Rightly so. And ALL their respective co-workers KNOW they are pissed even before they pick up the phone or walk down the hall to see about getting it fixed.

Now some may say “so what’s the big deal if they take their concern to someone sitting in HR versus someone sitting in Finance?”

Well…it IS a big deal when that hybrid HR/Payroll Manager is simultaneously working very hard to change the view of HR within their organization and to their company’s leadership team.

It comes down to HR professionals and HR leaders (especially HR Departments of One) determining their raison d’etre and strongly advocating for what they SHOULD do and SHOULDN’T do. What they WILL do and WON’T do.

Long ago I determined that the reason for HR’s existence (and therefore my reason in any organization) is to “connect the capabilities of individuals to organizational success” and HR delivers value when we “support and enable the execution of organizational strategy.”

My work (“what I do”), therefore, includes the work that does exactly that: supporting and nurturing a culture that aligns with organizational goals. Providing managers/leaders with coaching, support and guidance so they can execute that company strategy. Removing barriers and obstacles so that employees can do their best work, achieve their personal/professional goals and feel a sense of purpose and connection.

That’s HR to me.

And it doesn’t include downloading swipes from the timeclock or sending out W2s at the end of the year.

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