Ask management at almost any small or mid-sized company, “Who owns payroll at your organization?” and you’re bound to get answers all over the map.
In fact, Namely’s recent research found that 34 percent of companies say that HR owns payroll, 25 percent say that finance owns payroll, 35 percent say a separate payroll department owns payroll, and 6 percent completely outsource payroll. Needless to say, there is no standard for where payroll should fall within a company.
So how can you figure out who should own payroll at your organization? To help you make the best decision, we asked the experts over at our partner, Namely!
Here are 5 questions they recommended asking when deciding where to report payroll:
If one is the loneliest number, 50 is the most intimidating for HR teams at small businesses. Once your headcount passes this threshold, you effectively trigger an avalanche of new reporting and HR compliance requirements.
If you’re still under that 50-employee mark, it’s likely that you are (or should be) outsourcing your payroll completely—whether that be to a PEO or to a payroll technology company that can help you offload administrative burden.
Once you’re over 50 employees, that’s when the “Who should own payroll?” question really begins to come into play—leading us to our next question.
It may come as no surprise that if you have zero full-time HR employees, they can’t own payroll processes. But most small- and mid-sized companies do have HR teams, though often small themselves. If your HR team is only one or two people, consider either outsourcing payroll or having your finance team handle it. This will allow your HR team to focus on recruitment, building company culture, workforce compliance, and other important people initiatives.
Once your HR team is a bit more sizable, however, it becomes possible to have a dedicated payroll resource on your team—or at least someone who has the bandwidth to handle payroll operations and questions as a part of their role.
When thinking about your payroll goals, are you hoping to ease the day-to-day administrative burden and make payroll as seamless as possible for those who are running it? Or is your main goal making sure employees are happy with their paychecks, that they understand all deductions, and that they have someone they can ask all their payroll-related questions?
Think about questions like these when deciding where payroll should fall. HR is typically where employees will go when they have questions or when pay issues arise, but HR often isn’t as versed in financial practices. They might not be able to build seamless processes for your company. There is no right or wrong answer—only what is right or wrong for your organization.
Perhaps the most important skill HR professionals possess is the ability to keep employee information confidential. This has been hammered into their brains across their schooling and their professional careers. While of course finance employees at companies have to keep financial information confidential, they do not have the same training as HR professionals when it comes to employee confidentiality.
When all of your employees live in one place within the same country, payroll is certainly easier. But in today’s work-from-anywhere environment, this just isn’t often the case. When your business starts to hire employees in different states and countries, you introduce new complications and compliance issues. For instance, when an employee moves to a new state, your company must go through state tax registration in that state. And with international employees, employers must make the decision of whether they want to register in that country, use an Employer of Record Service, stick with their PEO, or outsource their payroll to an international payroll provider. Think about the complexity of your payroll when making the decision about where that responsibility should fall.
Thanks to our partner, Namely, these five questions on what you should ask yourself when deciding whether payroll should fall under HR or finance can help you decide who should handle payroll. For more information on the pros and cons of each question, check out Namely’s latest guide. To learn more about Verified First’s integration with Namely, visit our partner page.